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Phillips 66 (PSX) Gears Up for Q4 Earnings: What's in Store?

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Phillips 66 (PSX - Free Report) is set to report fourth-quarter 2019 results on Jan 31, before the opening bell.

In the last reported quarter, the company came up with earnings of $3.11 per share that surpassed the Zacks Consensus Estimate of $2.60 on the back of higher contributions from transportation and NGL businesses.

It surpassed the Zacks Consensus Estimate in each of the last four quarters, with the average being 31.4%, as shown in the chart below.

Phillips 66 Price and EPS Surprise

Let’s see how things have shaped up prior to the announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for fourth-quarter earnings of $1.53 has seen no upward movement and seven downward revisions in the past 30 days. The figure suggests a year-over-year decline of 68.6%.

Further, the Zacks Consensus Estimate for revenues is pegged at $27.3 billion for the quarter, indicating a decline of 8.5% from the year-ago reported figure.

Factors to Note

Midstream infrastructure is in high demand in the United States as there is a huge need for fresh pipeline and infrastructure properties in the flourishing shales. As such, Phillips 66 — a leading independent midstream and refining player — is expected to have gained significantly in the fourth quarter. The DJ O’Connor 2 plant — which came online in August — added 200 million cubic feet per day of natural gas processing capacity in the prolific Denver-Julesburg (DJ) Basin, which is expected to have boosted the company’s year-over-year profits from processing.

As such, the Zacks Consensus Estimate for adjusted pre-tax income from the Midstream segment is pegged at $419 million, indicating an increase from the year-ago level of $409 million. Moreover, for the Chemicals segment, the consensus mark for the metric is pegged at $165 million, suggesting an improvement from $152 million in fourth-quarter 2018.

However, the Zacks Consensus Estimate for adjusted pre-tax income from the Refining segment for the fourth quarter is pegged at $542 million, implying significant fall from $2,008 million in the year-ago period. As this segment is the largest contributor to profits (55% in 2018), lower income from the same might have affected its overall results in fourth-quarter 2019.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Phillips 66 this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here as you will see below.

Earnings ESP: The company’s Earnings ESP is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate stand at $1.53 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Phillips 66 currently carries a Zacks Rank #3.

Stocks That Warrant a Look

Though an earnings beat looks uncertain for Phillips 66, here are a few 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 in the upcoming quarterly reports:  

Enbridge Inc. ENB has an Earnings ESP of +3.66% and carries a Zacks Rank #2. The company is scheduled to release quarterly earnings on Feb 14. You can see the complete list of today’s Zacks #1 Rank stocks here.

NGL Energy Partners LP NGL has an Earnings ESP of +36.84% and a Zacks Rank #1. The company is set to release quarterly earnings on Feb 6.

Antero Resources Corporation AR has an Earnings ESP of +6.02% and a Zacks Rank #3. The company is set to release quarterly earnings on Feb 12.

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