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Phillips 66 (PSX) Down 2.1% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Phillips 66 (PSX). Shares have lost about 2.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Phillips 66 due for a breakout? 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 catalysts.

Phillips 66 Beats Earnings & Revenue Estimates in Q4

Phillips 66 has reported fourth-quarter 2023 adjusted earnings of $3.09 per share, which beat the Zacks Consensus Estimate of $2.37. However, the bottom line was lower than the year-ago quarter’s $4.

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Total quarterly revenues of $38.74 billion beat the Zacks Consensus Estimate of $34.3 billion. However, the top line declined from the year-ago quarter’s $40.91 billion.

Better-than-expected quarterly results can be primarily attributed to decreased costs and expenses. The positives were partially offset by lower refining margins worldwide.

Segmental Results

Midstream:

The segment generated adjusted pre-tax quarterly earnings of $754 million, up from $674 million in the year-ago quarter. The reported figure also surpassed our estimate of $410 million.

Chemicals:

The unit recorded adjusted pre-tax earnings of $106 million, up from $52 million in the prior-year quarter. The reported figure also surpassed our estimate of $88.8 million.

Refining:

The segment reported adjusted pre-tax earnings of $797 million, down from $1,626 million in the year-ago quarter. The reported figure also missed our projection of $977.4 million. The segment was affected by lower realized margins. The negatives were partially offset by the effects of inventory hedging, increased profits from clean products on the Gulf Coast and strong commercial results.

Refining’s realized refining margins worldwide declined to $14.41 per barrel from the year-ago quarter’s $19.73. The same in the Central Corridor and Atlantic Basin/Europe declined to $23.45 and $9.95 per barrel from the year-ago quarter’s $25.03 and $19.58, respectively.

The West Coast’s margins declined to $9.89 per barrel from $16.77 in the year-ago quarter. In the Gulf Coast, the metric declined to $13.96 per barrel from $16.35 a year ago.

Marketing and Specialties

Pre-tax earnings declined to $432 million from $539 million in the year-ago quarter.

Realized marketing fuel margins in the United States declined to $1.62 per barrel from the year-ago quarter’s $2.05. The same in the international markets also declined to $5 from $9.94 a year ago.

Costs and Expenses

Total costs and expenses in the fourth quarter declined to $37 billion from $38.36 billion in the year-ago period. The reported figure is above our projection of $31.84 billion.

Financial Condition

For the reported quarter, Phillips 66 generated $2.19 billion of net cash from operations, significantly down from $4.75 billion a year ago. The company’s capital expenditure and investments totaled $634 million. It paid out dividends of $457 million in the fourth quarter.

As of Dec 31, 2023, cash and cash equivalents were $3.3 billion. Total debt was $19.4 billion, reflecting a net debt to capitalization of 31%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -6.13% due to these changes.

VGM Scores

At this time, Phillips 66 has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Phillips 66 has a Zacks Rank #3 (Hold). We expect an in-line 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, Marathon Petroleum (MPC), a stock from the same industry, has gained 1%. The company reported its results for the quarter ended December 2023 more than a month ago.

Marathon Petroleum reported revenues of $36.82 billion in the last reported quarter, representing a year-over-year change of -8.2%. EPS of $3.98 for the same period compares with $6.65 a year ago.

Marathon Petroleum is expected to post earnings of $1.85 per share for the current quarter, representing a year-over-year change of -69.6%. Over the last 30 days, the Zacks Consensus Estimate has changed -13.4%.

Marathon Petroleum has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.

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