UPDATE 5-Valero profit falls short, but outlook strong

* Q1 EPS ex-items 18 cents vs Street view 30 cents

* Revenue up 42 pct to $26.3 billion, tops Street

* Sees strong refining margins throughout 2011

* Sees strong Q2, says 2011 EPS will beat Street

* Shares up 0.4 pct (Updates share price, adds outlook from conference call)

By Anna Driver

HOUSTON, April 26 (Reuters) - Valero Energy Corp's (VLO.N) quarterly profit fell short of expectations as plant shutdowns for maintenance took a toll on results, even as the refiner benefited from processing cheaper grades of crude oil at its Midwest facilities.

Valero refineries in California, Louisiana, Texas and Oklahoma all underwent maintenance in the first quarter, reducing earnings by 20 cents per share.

But profit is expected to top estimates for the year as margins improve and plant turnarounds slow, the company told analysts.

Valero and other refining companies with plants in the U.S. Midwest are benefiting from access to cheaper West Texas Intermediate crude oil.

A lack of southbound pipelines leading to the U.S. Gulf Coast export market has helped push crude oil stocks to record levels in the Midwest, so refiners with plants in that market have an edge over plants that process more expensive grades of oil.

Valero, which has refineries in Tennessee and Oklahoma, also has the ability to process less expensive sour grades of crude at most of its Gulf Coast plants.

"We expect a strong second quarter for Valero," Chief Executive Officer Bill Klesse said in a statement. "With our refineries coming back online from maintenance and operating at higher rates, we expect to capture more of these outstanding margins and wide discounts."

On a conference call with analysts, Klesse said he expects 2011 earnings to beat Wall Street expectations. Analysts' average forecast is $3.14 per share, according to Thomson Reuters I/B/E/S. [ID:nWEN1840]

Still, as the summer driving season approaches, high gasoline prices could cut into demand. The price for gasoline rose 11.5 cents in the past two weeks to an average of $3.88 per gallon, according to the nationwide Lundberg Survey. [ID:nN24173381].

Valero, based in San Antonio, Texas, said overall refining margins increased by $3.93 per barrel in the first quarter, primarily due to higher margins for diesel and jet fuel as well as bigger discounts for heavy-sour feedstocks on the Gulf Coast and light-sweet crude oils in the Mid-Continent.

"Versus my expectations, the results came in about where I thought they would," said Ann Kohler, analyst at CRT Capital Group. "Given the amount of turnaround activity they had, it was a pretty decent quarter."

First-quarter profit was $98 million, or 17 cents per share, compared with a loss of $113 million, or 20 cents per share, a year earlier.

Excluding one-time items, profit was 18 cents a share, well below analysts' forecasts for 30 cents. One-time items included an after-tax charge of $352 million, or 61 cents a share, from a loss related to forward sales of refined products in the derivatives markets.

Revenue rose 42 percent to $26.3 billion, topping Wall Street's average estimate of $22 billion, according to Thomson Reuters I/B/E/S.

Valero shares were up 0.4 percent to $29.24 in midday trading. (Additional reporting by Matt Daily in New York; Editing by Robert MacMillan, Dave Zimmerman and John Wallace)