Wall Street Analysts Look Bullish on Valero Energy (VLO): Should You Buy?

When deciding whether to buy, sell, or hold a stock, investors often rely on analyst recommendations. Media reports about rating changes by these brokerage-firm-employed (or sell-side) analysts often influence a stock's price, but are they really important?Before we discuss the reliability of brokerage recommendations and how to use them to your advantage, let's see what these Wall Street heavyweights think about Valero Energy (VLO).Valero Energy currently has an average brokerage recommendation (ABR) of 1.63, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by 19 brokerage firms. An ABR of 1.63 approximates between Strong Buy and Buy.Of the 19 recommendations that derive the current ABR, 14 are Strong Buy, representing 73.7% of all recommendations.Brokerage Recommendation Trends for VLOCheck price target & stock forecast for Valero Energy here>>>While the ABR calls for buying Valero Energy, it may not be wise to make an investment decision solely based on this information. Several studies have shown limited to no success of brokerage recommendations in guiding investors to pick stocks with the best price increase potential.Do you wonder why? As a result of the vested interest of brokerage firms in a stock they cover, their analysts tend to rate it with a strong positive bias. According to our research, brokerage firms assign five "Strong Buy" recommendations for every "Strong Sell" recommendation.This means that the interests of these institutions are not always aligned with those of retail investors, giving little insight into the direction of a stock's future price movement. It would therefore be best to use this information to validate your own analysis or a tool that has proven to be highly effective at predicting stock price movements.With an impressive externally audited track record, our proprietary stock rating tool, the Zacks Rank, which classifies stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), is a reliable indicator of a stock's near -term price performance. So, validating the Zacks Rank with ABR could go a long way in making a profitable investment decision.ABR Should Not Be Confused With Zacks RankAlthough both Zacks Rank and ABR are displayed in a range of 1-5, they are different measures altogether.The ABR is calculated solely based on brokerage recommendations and is typically displayed with decimals (example: 1.28). In contrast, the Zacks Rank is a quantitative model allowing investors to harness the power of earnings estimate revisions. It is displayed in whole numbers -- 1 to 5.Analysts employed by brokerage firms have been and continue to be overly optimistic with their recommendations. Since the ratings issued by these analysts are more favorable than their research would support because of the vested interest of their employers, they mislead investors far more often than they guide.On the other hand, earnings estimate revisions are at the core of the Zacks Rank. And empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.In addition, the different Zacks Rank grades are applied proportionately to all stocks for which brokerage analysts provide current-year earnings estimates. In other words, this tool always maintains a balance among its five ranks.Another key difference between the ABR and Zacks Rank is freshness. The ABR is not necessarily up-to-date when you look at it. But, since brokerage analysts keep revising their earnings estimates to account for a company's changing business trends, and their actions get reflected in the Zacks Rank quickly enough, it is always timely in indicating future price movements.Should You Invest in VLO?Looking at the earnings estimate revisions for Valero Energy, the Zacks Consensus Estimate for the current year has declined 1.8% over the past month to $8.24.Analysts' growing pessimism over the company's earnings prospects, as indicated by strong agreement among them in revising EPS estimates lower, could be a legitimate reason for the stock to plunge in the near term.The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #5 (Strong Sell) for Valero Energy. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>Therefore, it could be wise to take the Buy-equivalent ABR for Valero Energy with a grain of salt.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Valero Energy Corporation (VLO): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks