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Why Is Phillips 66 Partners LP (PSXP) Down 6% Since Last Earnings Report?

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It has been about a month since the last earnings report for Phillips 66 Partners LP (PSXP - Free Report) . Shares have lost about 6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Phillips 66 Partners LP due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Phillips 66 Partners Beats Q2 Earnings & Revenues Estimates

Phillips 66 Partners reported second-quarter 2020 earnings per unit of $1.05, which beat the Zacks Consensus Estimate of 75 cents. However, earnings declined from $1.15 per unit in the year-ago quarter.

Revenues of $430 million increased from $401 million in the year-ago quarter and beat the Zacks Consensus Estimate of $367 million.

The better-than-expected results were owing to higher storage and processing activities, partially offset by lower pipeline volumes of crude oil and refined petroleum products and NGL.

Operating Information

The partnership provides services through Pipelines, Terminals and Storage Processing & Other activities.

Pipeline: In second-quarter 2020, the partnership generated revenues of $97 million, down from $117 million in the prior-year period. The drop was due to lower pipeline volumes of crude oil and refined petroleum products and NGL. Notably, average pipeline revenues of 65 cents per barrel increased from 64 cents in the year-ago quarter.

Terminals: The partnership generated $33 million revenues, down from $39 million in the year-ago quarter due to lower throughput volumes of refined petroleum products and crude oil.

Notably, average terminalling revenue per barrel was 33 cents in the quarter, flat with the year-ago quarter.

Storage, Processing & Other activities: Through these activities, the partnership generated revenues of $111 million, up from $107 million in the year-ago quarter.

Costs & Expenses

In the June quarter of 2020, the partnership reported operating and maintenance expenses of $84 million, down from $85 million in the year-ago quarter. However, total costs and expenses increased to $175 million in second-quarter 2020 from the year-ago $167 million.

Balance Sheet & Capex

As of Jun 30, 2020, the partnership recorded cash and cash equivalents of $7 million, down from $92 million at the end of first-quarter 2020. Total debt at the end of the quarter under review was $3,707 million, up from $3,516 million in the March quarter. Notably, it has $532 million available under the revolving credit facility.

Capital expenditure and investment in the second quarter totaled $377 million.

Strategic Update & Outlook

Phillips 66 Partners hints at the possibility of a cut in capital expenditure if the court orders to shut the Dakota Access Pipeline.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Phillips 66 Partners LP has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Phillips 66 Partners LP has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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