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Phillips 66 (PSX) Beats on Q4 Earnings on Refining Strength

Zacks Equity Research

Phillips 66 PSX 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.

Investors should know that following Phillips’ strong earnings, the stock rallied almost 5% in the pre-market trading session.

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%.

Zacks Rank and Key Picks

Currently, Phillips 66 carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the energy space are Jones Energy, Inc. JONE, Golar LNG Partners LP GMLP and Sunoco LP SUN. Jonescarries a Zacks Rank #2 (Buy), while Golar LNG and Sunoco sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Jones Energy expects 2019 earnings growth of 19% year over year.

Golar LNG delivered average positive earnings surprise of 92.8% in the preceding four quarters.

Sunoco LP pulled off average positive earnings surprise of 18.39% in the trailing four quarters.

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