Phillips 66 (PSX - Free Report) is able to cash in on high refining margins and gasoline prices. This Zacks Rank #1 (Strong Buy) pays a big dividend and is paying down debt.
Phillips 66 is an energy company that includes Midstream, Chemicals, Refining, and Marketing and Specialties businesses.
It operates 12 refineries in the US and Europe and owns 7,540 gas stations in 48 states.
Another Beat in the Second Quarter
On July 29, Phillips 66 reported its second quarter results and beat on the Zacks Consensus by $0.85. Earnings were $6.77 versus the consensus of $5.92.
It was the 6th earnings beat in a row.
The quarter was driven by strong refining operations including execution of its planned turnarounds. It also saw continued record-setting NGL fractionated volumes.
"Our earnings reflect the strong market environment during the second quarter driven by a tight global product supply and demand balance," said Mark Lashier, CEO.
Adjusted pre-tax income for Refining was $3.1 billion in the second quarter, up from the adjusted pre-tax income of $140 million in the first quarter of 2022. The improvement was primarily due to higher realized margins driven by market crack spreads.
The composite global market crack increased to $46.72 per barrel, up from $21.93 per barrel in the first quarter. Realized margins were $28.31 per barrel in the second quarter, up from $10.55 per barrel in Q1.
The gas stations, which is marketing, also saw a big increase in the quarter. Adjusted pre-tax income for Marketing and Other was $656 million in the second quarter, an increase of $453 million from Q1. The increase was mainly due to higher realized fuel margins including inventory impacts.
Balance Sheet and Dividends
In the second quarter, Phillips 66 repaid $1.5 billion of debt and funded $467 million of dividends, $66 million of share repurchases and $376 million of capital expenditures and investments.
The dividend is generous. It is yielding 4.4%.
2022 and 2023 Earnings Estimates Revised Higher
The analysts were already bullish going into the report due to the crack spread. But they are raising estimates again after the report.
One estimate is higher in the last week for 2022, pushing the Zacks Consensus up to $14.86 from $13.17 in the last 30 days.
That is earnings growth of 160.7% compared to 2021 when the company made just $5.70.
Analysts are also bullish on 2023 even though its still 5 months away. 2 estimates were revised higher for 2023 in the last week, pushing up the Zacks Consensus to $10.90 from $9.75 in the last month.
Shares Up in 2022 But Still on Sale
Energy has been one of the best performing industries in 2022. Phillips 66 shares are up 15.6% year-to-date.
But, since June 8, 2022, they have fallen 20.6%.
They're on sale with a forward P/E of just 5.9 and a PEG ratio of 0.5. A PEG ratio under 1.0 usually indicates a company has both growth and value.
For investors trying to find companies that are cheap, but also growing earnings, Phillips 66 is one to keep on the short list.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Phillips 66 (PSX - Free Report) is able to cash in on high refining margins and gasoline prices. This Zacks Rank #1 (Strong Buy) pays a big dividend and is paying down debt.
Phillips 66 is an energy company that includes Midstream, Chemicals, Refining, and Marketing and Specialties businesses.
It operates 12 refineries in the US and Europe and owns 7,540 gas stations in 48 states.
Another Beat in the Second Quarter
On July 29, Phillips 66 reported its second quarter results and beat on the Zacks Consensus by $0.85. Earnings were $6.77 versus the consensus of $5.92.
It was the 6th earnings beat in a row.
The quarter was driven by strong refining operations including execution of its planned turnarounds. It also saw continued record-setting NGL fractionated volumes.
"Our earnings reflect the strong market environment during the second quarter driven by a tight global product supply and demand balance," said Mark Lashier, CEO.
Adjusted pre-tax income for Refining was $3.1 billion in the second quarter, up from the adjusted pre-tax income of $140 million in the first quarter of 2022. The improvement was primarily due to higher realized margins driven by market crack spreads.
The composite global market crack increased to $46.72 per barrel, up from $21.93 per barrel in the first quarter. Realized margins were $28.31 per barrel in the second quarter, up from $10.55 per barrel in Q1.
The gas stations, which is marketing, also saw a big increase in the quarter. Adjusted pre-tax income for Marketing and Other was $656 million in the second quarter, an increase of $453 million from Q1. The increase was mainly due to higher realized fuel margins including inventory impacts.
Balance Sheet and Dividends
In the second quarter, Phillips 66 repaid $1.5 billion of debt and funded $467 million of dividends, $66 million of share repurchases and $376 million of capital expenditures and investments.
The dividend is generous. It is yielding 4.4%.
2022 and 2023 Earnings Estimates Revised Higher
The analysts were already bullish going into the report due to the crack spread. But they are raising estimates again after the report.
One estimate is higher in the last week for 2022, pushing the Zacks Consensus up to $14.86 from $13.17 in the last 30 days.
That is earnings growth of 160.7% compared to 2021 when the company made just $5.70.
Analysts are also bullish on 2023 even though its still 5 months away. 2 estimates were revised higher for 2023 in the last week, pushing up the Zacks Consensus to $10.90 from $9.75 in the last month.
Shares Up in 2022 But Still on Sale
Energy has been one of the best performing industries in 2022. Phillips 66 shares are up 15.6% year-to-date.
But, since June 8, 2022, they have fallen 20.6%.
They're on sale with a forward P/E of just 5.9 and a PEG ratio of 0.5. A PEG ratio under 1.0 usually indicates a company has both growth and value.
For investors trying to find companies that are cheap, but also growing earnings, Phillips 66 is one to keep on the short list.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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