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Why Is Phillips 66 (PSX) Up 5.6% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for Phillips 66 (PSX - Free Report) . Shares have added about 5.6% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is PSX due for a pullback? 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.

First-Quarter 2018 Results

Phillips 66 posted adjusted first-quarter 2018 earnings of $1.04 per share that comfortably surpassed the Zacks Consensus Estimate of 91 cents. The bottom line increased from the year-ago quarter figure of 56 cents. Improved earnings from all its segments, except Refining, supported growth.

Quarterly revenues of $24 billion were higher than the year-ago quarter’s level of $23.7 billion. However, the top line missed the Zacks Consensus Estimate of $29.2 billion.

Segment Results

Midstream

The segment generated adjusted quarterly earnings of $233 million compared with $112 million in the year-ago quarter. Lower operating costs and taxes contributed to growth. It was partially offset by the impact of refinery turnarounds.

Chemicals

The segment generated adjusted earnings of $232 million compared with $181 million in the prior-year quarter. The upside was mainly driven by improved margins, higher volumes and lower taxes. Further, return of Cedar Bayou facility to full time operations contributed to growth.

Refining

The segment generated adjusted earnings of $91 million compared with $259 million in the prior-year quarter. Increased expenses due to intense turnaround activity and lower volumes led to the decline. During the quarter, Phillips 66’s refining utilization and clean product yields were 89% and 83%, respectively.

Marketing and Specialties (M&S)

Segmental earnings were $184 million, up from $141 million in the prior-year quarter.

Financial Condition

In the reported quarter, Phillips 66 generated $488 million in cash from operations. It also returned capital worth $3.8 billion to shareholders. Of this, $327 million was distributed as dividends, while $3.5 billion was used to repurchase shares of common stock.

As of Mar 31, 2018, the company had cash and cash equivalents of $842 million and debt of $11.6 billion. The company’s debt-to-capitalization ratio was 32%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter.

Phillips 66 Price and Consensus

VGM Scores

At this time, PSX has a nice Growth Score of B, though it is lagging a lot on the momentum front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions looks promising. Notably, PSX has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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