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Phillips 66 (PSX) Up 5% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Phillips 66 (PSX). Shares have added about 5% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Phillips 66 due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Phillips 66 Beats on Q3 Earnings Estimates

Phillips 66 reported third-quarter 2022 adjusted earnings per share of $6.46, comfortably beating the Zacks Consensus Estimate of $4.98. The bottom line also improved from $3.18 per share in the year-ago quarter.

Total quarterly revenues of $48,764 million increased from the year-ago quarter’s $31,472 million.

Strong quarterly earnings can be attributed to robust refining margins worldwide.

Segmental Results

Midstream:

The segment generated adjusted pre-tax quarterly earnings of $645 million, up from $642 million in the year-ago quarter. Higher contributions from NGL and others aided the segment.

Chemicals:

The segment recorded adjusted pre-tax earnings of $135 million, down from $634 million in the prior-year quarter. Lower contributions from the olefins and polyolefins business primarily hurt the segment.

Refining:

The segment reported adjusted pre-tax earnings of $2,827 million, significantly up from $184 million in the prior-year quarter. The segment was backed by increased volumes and realized margins.

The segment’s realized refining margins worldwide improved to $26.58 per barrel from the year-ago quarter’s $8.57. The same in the Central Corridor and Atlantic Basin/Europe increased to $38.76 and $19.22 per barrel from the year-ago levels of $12.47 and $9.27, respectively.

In the Gulf Coast, the metric registered an improvement to $21.29 per barrel from $5.75 in the prior-year quarter. The West Coast witnessed an increase in margins from $7.46 per barrel in the year-ago quarter to $28.64 in the September-end quarter of 2022.

Marketing and Specialties

Pre-tax earnings increased to $847 million from $547 million in the year-ago quarter.

While realized marketing fuel margins in the United States increased to $2.49 per barrel from the year-ago quarter’s $2.29 per barrel, the same in the international markets increased to $12.40 from the year-ago level of $6.75.

Financial Condition

For the reported quarter, Phillips 66 generated $3.1 billion of net cash from operations. Its capital expenditure and investments totaled $735 million. It paid out dividends of $466 million in the reported quarter.

As of Sept 30, 2022, cash and cash equivalents were $3.7 billion. The company’s total liquidity was $10.5 billion. Total debt was $17.7 billion, reflecting a consolidated debt to capitalization of 35%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

The consensus estimate has shifted 36.3% due to these changes.

VGM Scores

At this time, Phillips 66 has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Phillips 66 has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Phillips 66 is part of the Zacks Oil and Gas - Refining and Marketing industry. Over the past month, TotalEnergies SE Sponsored ADR (TTE), a stock from the same industry, has gained 13.9%. The company reported its results for the quarter ended September 2022 more than a month ago.

TotalEnergies SE Sponsored ADR reported revenues of $69.04 billion in the last reported quarter, representing a year-over-year change of +26.1%. EPS of $3.83 for the same period compares with $1.76 a year ago.

For the current quarter, TotalEnergies SE Sponsored ADR is expected to post earnings of $3.46 per share, indicating a change of +35.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -7.8% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for TotalEnergies SE Sponsored ADR. Also, the stock has a VGM Score of A.

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