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Can Phillips 66 (PSX) Pull a Surprise this Earnings Season?
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Phillips 66 (PSX - Free Report) is expected to report third-quarter 2016 earnings on Oct 28, before market opens.
In the last reported quarter, the company’s earnings of 94 cents per share beat the Zacks Consensus Estimate of 91 cents. The bottom line, however, was below the year-ago quarter level of $1.83 per share. Nonetheless, investors should note that the company outpaced the Zacks Consensus Estimate in three of the last four quarters.
Let’s see how things are shaping up prior to the announcement.
Factors Likely to Influence Earnings
We are optimistic about Phillips 66’s geographically diversified refinery base. The company’s 14 refineries enable it to participate in various market opportunities and provide an advantage over region-specific competitors. Further, most of Phillips 66’s refineries are integrated with transportation, marketing and commercial operations that provide crude supply flexibility. These refineries benefit from strong margins because of low feedstock costs, courtesy of higher proportion of onshore crude sources that offer a distinct cost advantage over seaborne crudes. Phillips 66 also owns or has interests in three refineries in Europe and one in Asia. Owing to all those positives the company has been able to make substantial profits in the past and we expect the trend to continue in the soon-to-be-reported quarter as well.
Also, the aforesaid factors have enabled the company to pay attractive dividend since its spin-off from ConocoPhillips on May 2012. We expect the company to go on increasing dividend in the long run, which in turn, should further cement investor confidence on the stock.
However, Phillips 66’s chemicals business operates in a highly volatile industry wherein sales prices are always fluctuating. As a result, the company’s profitability in such a sector is not always guaranteed.
Low oil prices have resulted in declining production as a result of spending cuts by most of the oil majors. This in turn could slow midstream investments and growth outlook and adversely affect Phillips 66 operations.
Earnings Whispers
Our proven model does not conclusively show that Phillips 66 will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate for the company stand at 89 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Phillips 66 carries a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, an Earnings ESP of 0.00% makes surprise prediction difficult.
Conversely, the Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.
Stocks to Consider
While an earnings beat looks uncertain for Phillips 66, here are some firms that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat this quarter:
Spectra Energy Corp. (SE - Free Report) has an Earnings ESP of +12.50% and a Zacks Rank #3. The company is expected to release third-quarter earnings results on Nov 2.
Enterprise Products Partners LP (EPD - Free Report) has an Earnings ESP of +3.33% and a Zacks Rank #3. The company is expected to release earnings results on Oct 27.
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Can Phillips 66 (PSX) Pull a Surprise this Earnings Season?
Phillips 66 (PSX - Free Report) is expected to report third-quarter 2016 earnings on Oct 28, before market opens.
In the last reported quarter, the company’s earnings of 94 cents per share beat the Zacks Consensus Estimate of 91 cents. The bottom line, however, was below the year-ago quarter level of $1.83 per share. Nonetheless, investors should note that the company outpaced the Zacks Consensus Estimate in three of the last four quarters.
PHILLIPS 66 Price and EPS Surprise
PHILLIPS 66 Price and EPS Surprise | PHILLIPS 66 Quote
Let’s see how things are shaping up prior to the announcement.
Factors Likely to Influence Earnings
We are optimistic about Phillips 66’s geographically diversified refinery base. The company’s 14 refineries enable it to participate in various market opportunities and provide an advantage over region-specific competitors. Further, most of Phillips 66’s refineries are integrated with transportation, marketing and commercial operations that provide crude supply flexibility. These refineries benefit from strong margins because of low feedstock costs, courtesy of higher proportion of onshore crude sources that offer a distinct cost advantage over seaborne crudes. Phillips 66 also owns or has interests in three refineries in Europe and one in Asia. Owing to all those positives the company has been able to make substantial profits in the past and we expect the trend to continue in the soon-to-be-reported quarter as well.
Also, the aforesaid factors have enabled the company to pay attractive dividend since its spin-off from ConocoPhillips on May 2012. We expect the company to go on increasing dividend in the long run, which in turn, should further cement investor confidence on the stock.
However, Phillips 66’s chemicals business operates in a highly volatile industry wherein sales prices are always fluctuating. As a result, the company’s profitability in such a sector is not always guaranteed.
Low oil prices have resulted in declining production as a result of spending cuts by most of the oil majors. This in turn could slow midstream investments and growth outlook and adversely affect Phillips 66 operations.
Earnings Whispers
Our proven model does not conclusively show that Phillips 66 will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate for the company stand at 89 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Phillips 66 carries a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, an Earnings ESP of 0.00% makes surprise prediction difficult.
Conversely, the Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.
Stocks to Consider
While an earnings beat looks uncertain for Phillips 66, here are some firms that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat this quarter:
Ensco plc , which is expected to release earnings results on Oct 27, has an Earnings ESP of +7.69% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Spectra Energy Corp. (SE - Free Report) has an Earnings ESP of +12.50% and a Zacks Rank #3. The company is expected to release third-quarter earnings results on Nov 2.
Enterprise Products Partners LP (EPD - Free Report) has an Earnings ESP of +3.33% and a Zacks Rank #3. The company is expected to release earnings results on Oct 27.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>