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Why Hold Strategy is Apt for Phillips 66 (PSX) Stock Now
Phillips 66 (PSX - Free Report) has not witnessed any earnings estimate revisions for 2023 and 2024 over the past seven days. Year to date, the stock gained 12.8%, outpacing the industry’s 4.7% rise.
What's Favoring the Stock?
PSX has a diversified business model, with a significant presence in businesses related to refining midstream, chemicals and marketing & specialties. In each of the operations, Phillips 66 has a solid footprint pertaining to safety, profitability, size and competitive strengths.
It is focusing more on businesses like midstream, renewables and chemicals, which makes the business model more stable. Having 72,000 miles of U.S. pipeline network, the company expects roughly 80% of its midstream contracts to be fee-based, signifying a stable business model with low sensitivity to commodity price fluctuations.
Phillips 66, carrying a Zacks Rank #3 (Hold), has a strong focus on returning capital to shareholders. In July 2012, the company got authorization for $25 billion of share buyback, and since then, the energy major has repurchased shares worth $16.9 billion. The remaining program will continue and has no expiration date.
Risks
Phillips 66’s refining business is exposed to extreme volatility in commodity prices since the end products are made with raw crude oil. Rising input costs hurt the company’s refining business.
Stocks to Consider
Better-ranked players in the energy space include EOG Resources, Inc (EOG - Free Report) and Exxon Mobil Corporation (XOM - Free Report) . Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
EOG Resources is a leading oil and natural gas exploration and production company. It is well-placed to capitalize on the promising business scenario. It has many undrilled premium locations, resulting in a brightened production outlook.
In order to have a dominant presence in the Permian, ExxonMobil has entered into a staggering $59.5 billion all-stock deal to buy Pioneer Natural Resources . Pioneer Natural is one of the foremost oil producers operating in the Permian Basin, the most prolific basin in the industry.