Back to top

Image: Bigstock

Phillips 66 (PSX) Gears Up for Q1 Earnings: What's in Store?

Read MoreHide Full Article

Phillips 66 (PSX - Free Report) is set to report first-quarter 2020 results on May 1, before the opening bell.

In the last reported quarter, the company came up with earnings of $1.54 per share, which surpassed the Zacks Consensus Estimate by a penny on the back of higher contributions from the chemical business.

It surpassed the Zacks Consensus Estimate in each of the last four quarters, with the average being 12.4%, as shown in the chart below.

Phillips 66 Price and EPS Surprise

Phillips 66 Price and EPS Surprise

Phillips 66 price-eps-surprise | Phillips 66 Quote

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

Trend in Estimate Revision

The Zacks Consensus Estimate for first-quarter earnings of 65 cents per share has seen one upward movement and four downward revisions in the past 30 days. The figure suggests a year-over-year increase of 62.5%.

Further, the Zacks Consensus Estimate for revenues is pegged at $22.5 billion for the quarter, indicating a decline of 5.1% from the year-ago reported figure.

Factors to Note

Although midstream infrastructure is in high demand in the United States, coronavirus-induced lockdowns have caused energy demand destruction all over the country and abroad. This is expected to reflect on the company’s first-quarter refining results. Moreover, minimum crude rates in many of its refineries are likely to have resulted in lower utilizations. First-quarter refinery utilization rates are expected in the 80-85% range, down from initial expectation of 90%.

Given the market conditions in the first quarter, the Zacks Consensus Estimate for adjusted pre-tax income from the Midstream segment is pegged at $410 million, indicating an increase from the fourth-quarter 2019 level of $405 million and the year-ago figure of $316 million. However, the Zacks Consensus Estimate for adjusted pre-tax income from the Refining segment for the first quarter is pegged at $295 million, implying fall from $345 million in the fourth quarter due to lower demand. As this segment is the largest contributor to profits (40% in 2019), lower income from the same might reflect on its overall first-quarter results. However, the segment recorded a loss of $219 million in the year-ago quarter.

For the Marketing and Specialties segment, the consensus mark for the said metric is pegged at $227 million, suggesting a decrease from $287 million in fourth-quarter 2019. Nevertheless, the estimated figure indicates a rise from the year-ago profit of $205 million.

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 -4.06% as the Most Accurate Estimate is currently pegged at 62 cents per share, while the Zacks Consensus Estimate stands at 65 cents. 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 #5 (Strong Sell).

Energy Stocks With Favorable Combination

While earnings beat looks uncertain for Phillips 66, here are some companies from the Energy space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Southwestern Energy Company (SWN - Free Report) has an Earnings ESP of +3.90% and is a Zacks #2 Ranked player. The company is scheduled to release first-quarter results after the market closes on Apr 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

DCP Midstream, LP (DCP - Free Report) has an Earnings ESP of +2.99% and a Zacks Rank of 3. It is scheduled to report first-quarter results on May 6.

Viper Energy Partners LP (VNOM - Free Report) has an Earnings ESP of +63.08% and holds a Zacks Rank #3. It is set to report first-quarter results on May 4.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>