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Phillips 66 (PSX) Q3 Earnings Beat Estimates on Demand Recovery

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Phillips 66 (PSX - Free Report)  reported third-quarter 2021 adjusted earnings per share of $3.18, beating the Zacks Consensus Estimate of $1.95. The bottom line also turned around from a loss of 1 cent per share in the year-ago quarter.

Quarterly revenues totaled $31,472 million, up from the year-ago quarter’s $16,299 million. The top line also beat the Zacks Consensus Estimate of $22,459 million.

The strong quarterly results were driven by recovered refined product and fuel demand as more people are stepping out for work and leisure owing to the rapid rollout of coronavirus vaccines and easing of restrictions. Increased volumes and refining margins boosted its segments. Contribution from all the segments jumped in the third quarter.

Phillips 66 Price, Consensus and EPS Surprise

Phillips 66 Price, Consensus and EPS Surprise

Phillips 66 price-consensus-eps-surprise-chart | Phillips 66 Quote

Segmental Results

Midstream

The segment generated adjusted pre-tax quarterly earnings of $642 million, up from $354 million in the year-ago quarter. Higher contributions from transportation, NGL and other activities aided the segment. Increased equity income from the Bakken and Gray Oak pipelines boosted the segment.

Chemicals

It recorded adjusted pre-tax earnings of $634 million, up from $132 million in the prior-year quarter. Contributions from the olefins and polyolefins business, backed by high demand, aided the segment. Increased polyethylene sales volumes benefited the segment.

Refining

It reported adjusted pre-tax earnings of $184 million against the year-ago loss of $970 million. Increased volumes and refining margins backed the segment.

The segment’s realized refining margins on a worldwide basis improved to $8.57 per barrel from the year-ago quarter’s $1.78. The same in the Central Corridor and Atlantic Basin/Europe increased to $12.47 and $9.27 per barrel from the year-ago level of $4.46 and $1.65, respectively. In the Gulf Coast, the metric registered an improvement to $5.75 per barrel from a loss of 61 cents in the prior-year quarter. The West Coast witnessed an increase in margins from $2.23 per barrel in the year-ago quarter to $7.46 for the September quarter of 2021.

Marketing and Specialties

Pre-tax earnings increased to $547 million from $417 million in the year-ago quarter. Increased international margins and volumes due to the easing of coronavirus-related restrictions aided the segment.

While realized marketing fuel margins in the United States increased to $2.29 per barrel from the year-ago quarter’s $2.23, the same in international markets rose to $6.75 from the year-ago level of $6.28.

Costs and Expenses

Total costs and expenses for the third quarter increased to $31,024 million from $17,649 million in the year-ago period.

Financial Condition

For the reported quarter, Phillips 66 generated $2,203 million of net cash from operations, up from $491 million a year ago. Its capital expenditures and investments totaled $552 million. It paid dividends of $394 million in the reported quarter.

As of Sep 30, 2021, cash and cash equivalents were $2.9 billion. The company’s total liquidity was $8.6 billion. Consolidated debt was $14.9 billion, reflecting a debt to capitalization of 42%.

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Phillips 66 increased its quarterly dividend to 92 cents, which is reflective of the company’s strong operations. Its move of expanding footprint in the battery supply chain through NOVONIX investment can boost sustainability.

It recently announced the acquisition of Phillips 66 Partners’ (PSXP - Free Report) remaining units for $3.4 billion. The move is expected to simplify Phillips 66’s governance and corporate structure. The deal is likely to complete in first-quarter 2022.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the energy space include HollyFrontier Corporation (HFC - Free Report) and PHX Minerals Inc. (PHX - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

HollyFrontier’s bottom line for 2021 is expected to rise 260.9% year over year.

PHX Minerals’ bottom line for the current year is expected to rise 280% year over year.

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