Valero Energy Corp. (NYSE:VLO)

Current Income Tax Expense Trends

The current income tax expense exhibited significant volatility over the analyzed period. Starting at a positive value of $468 million at the end of 2019, it dropped sharply to a negative figure of -$1,061 million in 2020, indicating a tax benefit or credit recognized during that year. The subsequent years showed a recovery and growth, with positive current tax expenses recorded at $381 million in 2021, escalating substantially to $3,378 million in 2022. In 2023, the current tax expense slightly decreased but remained significantly elevated at $2,516 million.

Deferred Income Tax Expense Trends

Deferred income tax expense also fluctuated throughout the five-year span but with less magnitude compared to current taxes. It started at $234 million in 2019, increased to $158 million in 2020, indicating a recognition of deferred tax liabilities or a reversal of deferred tax assets. In 2021, the deferred income tax reverted to a negative figure of -$126 million, suggesting a deferred tax benefit, before increasing again to $50 million in 2022 and further to $103 million in 2023.

Total Income Tax Expense Trends

The total income tax expense, which is the sum of current and deferred components, mirrored the patterns observed in current tax expenses with considerable fluctuations. The total expense was $702 million in 2019, then turned to a tax benefit of -$903 million in 2020. It returned to a positive tax expense of $255 million in 2021, followed by a sharp increase to $3,428 million in 2022, then declined slightly to $2,619 million in 2023. The trend indicates episodic recognition of tax benefits in 2020 and 2021, followed by significant tax expenses in 2022 and 2023.

Overall Analysis and Insights

The data suggest a period of considerable tax expense variability influenced primarily by fluctuations in current tax obligations. The negative current tax expense in 2020 points to possible tax credits or adjustments, possibly associated with extraordinary items or tax policy changes occurring that year. The consistently positive and increasing current tax expenses in 2022 and 2023 point to higher taxable income or changes in tax rates or deferred tax asset/liability realizations. Deferred tax expenses, although less volatile, still contribute meaningfully to the total tax expense dynamics, especially with the negative figure in 2021 indicating recognition of deferred tax benefits. Overall, the financial periods reflect a transition from tax benefits to substantial tax expenses, suggesting notable changes in the company’s tax situation or profitability across these years.

Statutory Income Tax Rate

The statutory income tax rate remained constant at 21% throughout the entire period from 2019 to 2023, showing regulatory stability or consistent tax policy during these years.

Effective Income Tax Rate

The effective income tax rate displayed considerable variability across the analyzed years. In 2019, it was slightly below the statutory rate at 20.1%. However, in 2020, a significant increase occurred, with the rate more than doubling to 44.9%, indicating an unusual or extraordinary tax impact that year, possibly related to changes in taxable income composition or one-time adjustments.

In 2021, the effective tax rate dropped sharply to 16.5%, falling well below the statutory rate, which may reflect favorable tax treatments, credits, or loss carrybacks. The rate then increased moderately to 22.4% in 2022 and stabilized at 22.3% in 2023, levels that are slightly above the fixed statutory rate of 21%, suggesting a return to more typical tax circumstances but with some differences from the standard tax rate.

Tax Credit Carryforwards and Net Operating Losses (NOLs)

Tax credit carryforwards remained relatively stable from 2019 to 2022, fluctuating modestly between 660 and 683 million USD, before increasing notably to 809 million USD in 2023. NOLs showed an increasing trend overall, rising from 582 million USD in 2019 to 710 million USD in 2023, despite a dip in 2022.

Inventories

Inventories experienced significant fluctuation. Initially declining sharply from 141 million USD in 2019 to 70 million USD in 2020, inventories then surged to 326 million USD in 2022 before falling again to 237 million USD in 2023. The negative inventory entries likely represent inventory write-downs or adjustments, showing a declining trend from -217 million USD in 2019 to -106 million USD in 2023.

Compensation and Employee Benefit Liabilities

These liabilities steadily decreased from 213 million USD in 2019 to 32 million USD in 2023, indicating a consistent reduction over the analyzed period.

Environmental Liabilities

Environmental liabilities declined from 69 million USD in 2019 to 53 million USD in 2021, then slightly increased to reach 59 million USD in 2023, showing a relatively stable trend.

Finance Lease Obligations and Operating Lease Liabilities

Data are available only for 2022 and 2023. Finance lease obligations showed a slight increase from 309 million USD to 314 million USD. Operating lease liabilities increased marginally from 512 million USD in 2022 to 519 million USD in 2023. Related right-of-use (ROU) assets for operating leases also increased in their negative balances, indicating growing lease commitments.

Other Liabilities

Other liabilities exhibited variability, declining from 156 million USD in 2019 to 128 million USD in 2020, rising again to 186 million USD in 2022, and then decreasing to 130 million USD in 2023. The corresponding negative values for other assets also fluctuated but showed a general increase in absolute value.

Deferred Income Tax Assets and Valuation Allowance

Deferred income tax assets increased steadily from 1,844 million USD in 2019 to 2,810 million USD in 2023. The valuation allowance concurrently grew more negative, moving from -1,200 million USD in 2019 to -1,383 million USD in 2023. Net deferred income tax assets initially decreased slightly before surging significantly to 1,502 million USD in 2022 and then slightly declining to 1,427 million USD in 2023, reflecting changes in tax asset recognition and allowance adjustments.

Property, Plant, and Equipment; Deferred Turnaround Costs

Property, plant, and equipment showed increasing negative balances over time, from -4,924 million USD in 2019 to -5,121 million USD in 2023, likely indicating continued capital expenditures or depreciation. Deferred turnaround costs followed a similar pattern of increasing negative values, suggesting rising deferred maintenance or upgrade costs.

Investments and Other Assets

Investments deepened their negative balance from -122 million USD in 2019 to -423 million USD in 2023, signaling increased impairment or disposals. Other assets also showed an increasing negative trend overall.

Deferred Income Tax Liabilities and Net Deferred Income Tax Positions

Deferred income tax liabilities steadily increased from -5,747 million USD in 2019 to -6,776 million USD in 2023, indicating growing future tax obligations. Net deferred income tax assets (liabilities) remained persistently negative and gradually declined further from -5,103 million USD to -5,349 million USD, reflecting an overall net deferred tax liability position.

Deferred Income Tax Liabilities

The deferred income tax liabilities exhibit a relatively stable trend over the observed period from the end of 2019 through the end of 2023.

Starting at US$5,103 million at the end of 2019, there is a slight increase in 2020 to US$5,275 million, indicating a modest rise in deferred tax obligations during that year.

In 2021, the liabilities decreased marginally to US$5,210 million, followed by a near stabilization in 2022 at US$5,217 million, suggesting minimal fluctuations during these years.

By the end of 2023, the deferred tax liabilities rose slightly again to US$5,349 million, marking the highest level in the five-year span but without significant volatility.

Overall, the deferred income tax liabilities have maintained a consistent range between approximately US$5.1 billion and US$5.35 billion, reflecting a stable tax liability position relevant to deferred items during the period analyzed.

The financial data indicate several notable trends in the company's reported and adjusted figures from 2019 through 2023.

Liabilities

Reported total liabilities increased from 31,328 million USD in 2019 to a peak of 38,071 million USD in 2021, before decreasing to 34,532 million USD by 2023. Similarly, the adjusted total liabilities followed the same pattern, rising from 26,225 million USD in 2019 to 32,861 million USD in 2021, then declining to 29,183 million USD in 2023. This suggests the company experienced growing obligations through 2021, followed by a reduction or stabilization in subsequent years.

Stockholders’ Equity

In contrast to liabilities, reported total stockholders’ equity showed a decline from 21,803 million USD in 2019 to 18,430 million USD in 2021, but then rebounded strongly to 26,346 million USD by 2023. The adjusted stockholders’ equity mirrored this trend but at generally higher values, moving from 26,906 million USD in 2019 down to 23,640 million USD in 2021, before rising to 31,695 million USD in 2023. This pattern indicates an initial contraction in equity, possibly due to losses or other factors, with a subsequent period of recovery and growth.

Net Income (Loss) Attributable to Stockholders

Reported net income displays significant volatility over the period. A strong positive income of 2,422 million USD in 2019 turned into a loss of -1,421 million USD in 2020, followed by a modest profit of 930 million USD in 2021. The company then realized a substantial increase in net income in 2022, reaching 11,528 million USD, before a decrease to 8,835 million USD in 2023. Adjusted net income values follow a similar trajectory but with slightly different magnitudes, starting at 2,656 million USD in 2019, a loss of -1,263 million USD in 2020, and then progressing to 804 million USD in 2021, 11,578 million USD in 2022, and 8,938 million USD in 2023. These figures suggest the company faced challenges in 2020, likely related to external disruptions, but recovered strongly with significant profitability gains in the subsequent years.

Overall Insights

The data reflect a period of financial stress and instability around 2020 and 2021, as demonstrated by increased liabilities, decreased equity, and net losses. The years following 2021 show improvements in financial health, with liabilities reducing, equity rebounding, and net income surging to robust levels. The adjusted figures consistently depict a more favorable financial position compared to reported numbers, indicating the influence of tax adjustments that enhance the company's reported performance and financial position. The trends imply effective management actions or favorable market conditions contributing to the recovery and growth phases from 2022 onwards.

Net Profit Margin

The reported net profit margin experienced significant volatility over the period. It started at a modest 2.24% in 2019, fell into negative territory at -2.19% in 2020, reflecting a substantial decline likely due to external pressures. Recovery began in 2021 with a positive 0.82%, followed by a strong increase to 6.54% in 2022. In 2023, the margin slightly decreased to 6.1%, indicating stabilization at a higher profitability level. The adjusted net profit margin showed a similar trend but generally presented slightly more conservative figures, remaining close to the reported values and confirming the margin recovery post-2020 downturn.

Financial Leverage

The reported financial leverage ratio demonstrated an increasing trend from 2.47 in 2019 to 3.14 in 2021, suggesting a growing use of debt relative to equity in the earlier years. However, this trend reversed in 2022 and 2023, with ratios reducing to 2.59 and 2.39 respectively, indicating a deleveraging strategy or improved equity base. The adjusted financial leverage followed a similar pattern but consistently showed lower values than the reported figures, pointing to adjustments that may have removed certain liabilities or reflected a more conservative leverage assessment.

Return on Equity (ROE)

The reported ROE was highly volatile, initially showing a positive 11.11% in 2019 before plunging to -7.56% in 2020, in line with the profit margin decline. It rebounded to 5.05% in 2021 and then surged dramatically to 48.93% in 2022, indicating exceptional returns to shareholders possibly driven by increased profitability and financial leverage changes. In 2023, ROE declined to 33.53%, remaining substantially elevated compared to earlier years but indicating some moderation. The adjusted ROE mirrored this pattern with consistently lower values, confirming the influence of adjustments but still reflecting significant recovery and improvement post-2020.

Return on Assets (ROA)

The reported ROA exhibited a decline from 4.5% in 2019 to -2.74% in 2020, reflecting impaired asset profitability during that year. Recovery ensued with ROA improving to 1.61% in 2021, followed by a sharp increase to 18.9% in 2022, and a slight decline to 14.01% in 2023. The adjusted ROA showed similar dynamics, with slightly muted values, reinforcing the observation of improved asset efficiency and profitability primarily in the two most recent years. The pattern indicates enhanced asset utilization and profitable operations after the challenging 2020 period.

Overall Observations

The data reveals a pronounced impact of the events in 2020, with profitability and returns significantly impaired. From 2021 forward, the company displayed recovery and marked improvement in profitability, returns, and leverage management. Adjusted figures consistently present a slightly more conservative perspective but closely align with reported metrics, underscoring the robustness of the underlying improvements. The peak in returns in 2022 followed by slight moderation in 2023 suggests the company reached a high-performance level and then entered a phase of stabilization.

The analysis of the reported and deferred income tax adjusted financial data over the five-year period reveals several notable trends.

Net Income (Loss) Attributable to Stockholders

The reported net income figures exhibit significant volatility. Starting with a positive income of 2,422 million USD in 2019, the company experienced a substantial loss in 2020 amounting to -1,421 million USD. This negative performance reversed in the subsequent years, with reported net income recovering to 930 million USD in 2021, followed by a sharp increase to 11,528 million USD in 2022. In 2023, the net income remained robust at 8,835 million USD, reflecting sustained profitability but at a lower level than the previous year.

The adjusted net income, accounting for deferred tax adjustments, follows a similar trend but with slightly less severe fluctuations. The adjusted income was 2,656 million USD in 2019, dipped to a loss of -1,263 million USD in 2020, then rose to 804 million USD in 2021. The upward trend continued into 2022 with 11,578 million USD adjusted net income, and remained strong at 8,938 million USD in 2023. The adjustments seem to moderate the swings but maintain the same directional changes as reported figures.

Net Profit Margin

The reported net profit margin displayed a corresponding pattern to net income, with positive margins of 2.24% in 2019, turning negative at -2.19% in 2020, which indicates an overall loss in profitability during that year. Margins rebounded to a modest 0.82% in 2021 and saw a significant improvement to 6.54% in 2022. Although a slight contraction is observed in 2023 to 6.1%, the margin remains substantially higher than the initial years, indicating strong profitability.

The adjusted net profit margin similarly mirrors this trend, starting at 2.45% in 2019, dipping to -1.95% in 2020, then improving to 0.71% in 2021. The margin peaked at 6.56% in 2022, followed by a slight decline to 6.17% in 2023. The adjustments have a slight effect on the margins, generally increasing them compared to reported values, but the overall trends are consistent.

In summary, the data reflects substantial challenges faced in 2020, likely due to external economic factors, followed by a strong recovery in both net income and profit margins. Adjusted figures, which incorporate income tax deferrals, tend to moderate the extent of losses and gains but confirm the same overall patterns. Profitability as measured by net profit margin has seen a notable increase since 2021, stabilizing at higher levels in recent years.

Stockholders’ Equity Trends

The reported total stockholders’ equity exhibited a decline from 21,803 million US dollars at the end of 2019 to 18,430 million US dollars by the end of 2021. Subsequently, there was a reversal of this trend, with equity rising to 23,561 million in 2022 and further increasing to 26,346 million in 2023.

In comparison, the adjusted total stockholders’ equity followed a similar pattern but consistently presented higher values than the reported figures. The adjusted equity declined from 26,906 million in 2019 to 23,640 million in 2021, then increased to 28,778 million in 2022 and reached 31,695 million in 2023. This upward adjustment suggests recognition of additional equity components related to deferred income tax adjustments.

Financial Leverage Trends

The reported financial leverage ratio increased from 2.47 at the end of 2019 to a peak of 3.14 in 2021, indicating higher reliance on debt relative to equity during this period. However, a decreasing trend followed, with leverage dropping to 2.59 in 2022 and further to 2.39 in 2023, reflecting deleveraging or growth in equity base relative to debt.

The adjusted financial leverage ratio also trended upwards initially from 2.00 in 2019 to 2.45 in 2021, but to a lesser extent than reported leverage ratios. After peaking in 2021, it declined to 2.12 in 2022 and 1.99 in 2023. The lower adjusted leverage indicates that after accounting for deferred income tax effects, the company’s leverage position is somewhat more conservative.

Insights and Implications

The overall patterns suggest that the company experienced financial pressures or equity reductions during the 2019-2021 period, potentially related to market or operational challenges, before recovery and strengthening in the subsequent years. The divergence between reported and adjusted equity and leverage highlights the significance of deferred income tax considerations in evaluating the company's financial health.

The reduction in both reported and adjusted financial leverage ratios after 2021 reflects a strategic shift towards strengthening the balance sheet, either through debt reduction or equity growth, improving the company’s financial stability and potentially its creditworthiness.

Net Income Trends

Reported net income attributable to stockholders exhibited significant volatility over the observed periods. After a positive result of $2,422 million in 2019, it declined sharply to a loss of $1,421 million in 2020. A recovery phase followed with a modest profit of $930 million in 2021, succeeded by a strong increase to $11,528 million in 2022 before slightly decreasing to $8,835 million in 2023. Adjusted net income showed a similar pattern, with values consistently higher than reported figures, indicating the exclusion of some negative or non-recurring items. The adjusted figures also moved from a loss in 2020 to substantial gains in 2022 and 2023.

Equity Trends

Reported stockholders’ equity declined from $21,803 million in 2019 to $18,430 million in 2021, signaling a reduction in equity base amidst financial challenges. Thereafter, a recovery trend is observed, with equity increasing to $23,561 million in 2022 and further to $26,346 million in 2023. Adjusted equity values were consistently higher than reported equity, following a similar downward trend until 2021, then robust growth in the last two years, surpassing $31,000 million by 2023. This suggests an improving financial position when accounting for adjustments.

Return on Equity (ROE) Patterns

Reported ROE exhibited strong fluctuations aligned with net income swings. It decreased from 11.11% in 2019 to a negative -7.56% in 2020, reflecting the net loss during that year. Recovery occurred in 2021 with moderate positive ROE of 5.05%, then a sharp increase to 48.93% in 2022, indicating highly profitable operations that year. In 2023, ROE moderated to 33.53% but remained at an elevated level. Adjusted ROE values followed similar directional trends but were consistently lower than reported ROE, implying that adjustments reduced profitability metrics but still confirmed substantial improvement in recent years.

Summary Insights

The data reveals a period of financial distress in 2020 with negative income and equity declines, followed by a strong recovery path in net income, equity, and ROE starting in 2021 and reaching peak profitability in 2022. Adjustments to net income and equity provide a more favorable view of financial performance and stability, though trends remain consistent between reported and adjusted figures. The substantial rebound in profitability metrics in 2022 and persistence of elevated returns into 2023 indicate a significant turnaround and strengthening financial health over the most recent periods.

Net Income Trends

The reported net income attributable to stockholders exhibited significant volatility over the analyzed periods. In 2019, the company recorded a positive net income of $2,422 million, followed by a substantial decline to a loss of $1,421 million in 2020. This loss was reversed in 2021 with a modest profit of $930 million. A notable surge occurred in 2022, reaching $11,528 million, before slightly declining to $8,835 million in 2023. Adjusted net income followed a similar pattern, starting at $2,656 million in 2019, dropping to a loss of $1,263 million in 2020, then recovering gradually to $804 million in 2021, peaking at $11,578 million in 2022, and finally decreasing to $8,938 million in 2023.

Return on Assets (ROA) Analysis

Both reported and adjusted ROA mirrored the movements in net income. The reported ROA was 4.5% in 2019, turned negative at -2.74% in 2020, and improved to 1.61% in 2021. A marked increase was observed in 2022, with ROA reaching 18.9%, followed by a reduction to 14.01% in 2023. Adjusted ROA exhibited a comparable trend: 4.93% in 2019, -2.44% in 2020, 1.39% in 2021, peaking at 18.99% in 2022, and then declining to 14.17% in 2023.

Overall Insights

The data reveals a period of instability in 2020, likely reflective of external challenges impacting profitability negatively. The strong recovery and substantial growth in 2022 suggest significant operational or market improvements. The decrease in 2023, while notable, still maintains profitability and returns well above pre-2020 levels. Adjusted figures consistently track closely with reported numbers, indicating limited impact from reported and deferred income tax adjustments on core profitability measures during this period.