Phillips 66 (PSX) Up 2.8% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Phillips 66 (PSX). Shares have added about 2.8% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Phillips 66 Q4 Earnings Beat Estimates, Rise Y/Y

Phillips 66 posted fourth-quarter 2018 adjusted earnings per share of $4.87, which surpassed the Zacks Consensus Estimate of $2.76. The bottom line increased from the year-ago quarter’s $1.07. The strong earnings performance was backed by significant improvement in realized refining margin. This was partially offset by turnaround activities in Chemicals businesses.

Quarterly revenues totaled $29.8 billion, down from the year-ago quarter’s $30.1 billion. The top line also missed the Zacks Consensus Estimate of $35.5 billion.

Segment Results

Midstream

The segment generated adjusted quarterly earnings of $409 million, up from $196 million in the year-ago quarter on increased pipeline throughput volumes.

Chemicals

The segment generated adjusted earnings of $152 million, down from $161 million in the year-ago quarter, owing to turnaround activities along with a drop in seasonal sales volumes

Refining

The segment’s adjusted earnings surged to $2,008 million from $510 million in the prior-year quarter, thanks to significant improvement in realized refining margin owing to plunge in oil prices through the December quarter of 2018. During the quarter, Phillips 66’s refining utilization was 99%.

Marketing and Specialties (M&S)

This segment’s earnings increased from $168 million in the year-ago quarter to $592 million.

Financial Condition

In the reported quarter, Phillips 66 generated $4,139 million of cash from operations. Through dividends and share repurchases, the company returned capital worth $864 million to stockholders.

As of Dec 31, cash and cash equivalents were $3,019 million along with debt of $11.2 billion. The company’s debt-to-capitalization ratio was 29%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -18.92% due to these changes.

VGM Scores

Currently, Phillips 66 has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.

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