If you look at the year-over-year improvement in the first-quarter earnings of U.S. refiners Valero Energy (VLO +2.44%), Marathon Petroleum (MPC +2.50%), and Phillips 66 (PSX +2.09%), the outlook for the summer driving season might seem very positive. But the refining business is complex. The energy sector is also being affected by the ongoing geopolitical conflict in the Middle East. Here’s what investors need to know right now about these three refiners as the summer driving season gets underway.
A strong start to the year
Valero Energy reported first-quarter 2026 earnings of $4.22 per share. That is up from a loss of $1.90 per share in the same quarter of 2025. Take out one-time items, and that $1.90 loss improves to a profit of $0.89 per share. But the year-over-year improvement is still pretty incredible.
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Marathon Petroleum reported first-quarter 2026 earnings of 1.73 per share. Removing one-time items lowered that to $1.65. However, that was still far above the $0.24 per share loss the company reported in the same quarter of 2025.
Phillips 66 reported first-quarter 2026 adjusted earnings of $0.49 per share. In the same quarter of 2025, the company lost $0.90 per share. However, Phillips 66 provided another data point that the other two refiners left out: Fourth quarter 2025 earnings. The energy company’s first-quarter adjusted earnings of $0.49 fell materially from the fourth quarter’s adjusted earnings of $2.47.
Looking back at Valero, it reported adjusted earnings of $3.22 in the fourth quarter of 2025, suggesting its first-quarter earnings of $4.22 wasn’t nearly as impressive sequentially. And Marathon reported fourth-quarter 2025 adjusted earnings of $4.07 per share, so the first-quarter 2026 adjusted earnings of $1.65 now look like a bit of a letdown.
Today’s Change
(2.44%) $5.87
Current Price
$246.96
Key Data Points
Market Cap
$73B
Day’s Range
$241.44 – $247.42
52wk Range
$125.10 – $263.75
Volume
2.5M
Avg Vol
3.7M
Gross Margin
5.88%
Dividend Yield
1.89%
A seasonal trade that may not be worth it for you
To be fair, all of these companies saw earnings improve between the first and second quarters of 2025. Two of the three saw a similar earnings improvement in the second quarter of 2024. But all three experienced a decline in earnings between the first and second quarters of 2023. In other words, history isn’t clear on whether refiners like Valero Energy, Marathon Petroleum, and Phillips 66 will benefit from the peak driving season. If you are simply looking to make a short-term trade, you may want to rethink your investment plan.
Today’s Change
(2.09%) $3.64
Current Price
$177.69
Key Data Points
Market Cap
$71B
Day’s Range
$173.51 – $178.19
52wk Range
$111.19 – $190.61
Volume
1.9M
Avg Vol
3.1M
Gross Margin
7.04%
Dividend Yield
2.78%
This year, meanwhile, there’s another big wild card that makes the driving season’s outcome even harder to predict: the geopolitical conflict in the Middle East. Indeed, oil prices are a key cost in the refining business, and the high energy prices resulting from the conflict are generally bad news for refiners. Notably, Phillips 66 reported a $839 million mark-to-market loss from hedging activity in the first quarter, likely due to rapidly rising energy prices. A shift in the direction of the conflict could dramatically alter the results for these three large U.S. refiners, for better or worse.
Invest for the long term, not for six months at a time
It is tempting to try to make a quick buck by investing in short-term opportunities. Refiners benefiting from an uptick in gasoline demand during the May to Sept. driving season sounds like a great idea in theory. But theory and practice don’t always align on Wall Street. And today, there is an extra layer of volatility thanks to the ongoing conflict in the Middle East.
Most investors should focus on the long term, buying stocks with the intent of owning them for decades. An investment you only plan to hold for five or six months probably isn’t going to be worth the effort. The recent history of refining stocks highlights the uncertain outcome of focusing on the short term, and that doesn’t even account for the additional complications in the current operating environment.
