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Here's Why You Should Snap Up Phillips 66 (PSX) Right Away

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On Aug 31, Phillips 66 (PSX - Free Report) has been upgraded to a Zacks Rank #2 (Buy), implying that the stock will outperform the broader U.S. equity market over the next one to three months.    

Why the Upgrade?

Over the past 30 days, the Zacks Consensus Estimate for 2018 earnings per share has been revised upward from $7.57 to $7.81. Meanwhile, the same for 2019 has moved up to $9.71 from $9.60. This enhances the company’s already impressive earnings profile. Phillips 66 surpassed the Zacks Consensus Estimate in the last four quarters, the average positive earnings surprise being 17.7%.

Moreover, we expect the company to see earnings growth of 78.3% and 24.4% in 2018 and 2019, respectively.

Phillips 66 is strongly committed to returning cash to its shareholders through dividend payments and share repurchases. Since 2013, the company has been consistently increasing its annualized dividend. In fact, through 2018, the firm is planning to pay per share annual dividend of $3.10, higher than $2.73 in 2017.

The company has been investing in projects that are expected to help boost its shareholders’ returns.  Phillips 66 plans to allocate a significant portion of its 2018 capital budget to midstream operations. This reflects the company’s intention of capitalizing on the growing demand for pipeline infrastructure in shale plays with bottleneck problems.

From new projects related to its midstream, chemicals and refining businesses through 2017-2018, the company expects adjusted EBITDA growth of $1.5 billion in long term.

Phillips 66 Price and Consensus

Phillips 66 Price and Consensus | Phillips 66 Quote

Other Stocks to Consider

Other top-ranked players in the energy space include McDermott International, Inc. , Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) and Helix Energy Solutions Group, Inc. (HLX - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

McDermott’s earnings surpassed the Zacks Consensus Estimate in the last four quarters, the average positive surprise being 101.7%.

Petrobras’ bottom line beat the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 10.4%.

Helix Energy’s bottom line exceeded the consensus mark in three of the last four quarters, the average earnings surprise being 66.7%.

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