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

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Phillips 66 PSX is set to report first-quarter 2020 results on Apr 30, before the opening bell.

In the last reported quarter, the diversified energy manufacturing and logistics company reported adjusted loss per share of $1.16, wider than the Zacks Consensus Estimate of a loss of $1.09 due to sinking demand of refined products caused by the coronavirus pandemic. Massive refining loss and decreased midstream profits affected its bottom line. This was partially offset by higher chemicals profit and realized marketing fuel margins in the international market.

The company surpassed the Zacks Consensus Estimate in three of the last four quarters and missed once, with the average surprise being 44.9%, as shown in the chart below.

Phillips 66 Price and EPS Surprise

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 this announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for first-quarter loss per share of $1.11 has witnessed five downward revisions in the past 30 days. The estimated figure suggests a decline of 208.8% from the prior-year reported number.

The consensus estimate for first-quarter revenues of $16.9 billion indicates a 20.6% decline from the year-ago reported figure.

Factors to Consider

Phillips 66’s first-quarter operations in the Central and Gulf Coast regions were significantly affected by severe winter storms. These caused havoc to power and gas supply systems in U.S. central and southern states, thereby affecting the utilization of the company’s assets. On account of this, it faced higher expenses associated with utility, maintenance and repair across Midstream, Chemicals and Refining business units. Unfavorable weather conditions are also expected to have affected its subsidiary Phillips 66 Partners LP’s PSXP first-quarter performance.

Moreover, dented global demand for refined petroleum products, triggered by the coronavirus pandemic, continued to hurt Phillips 66’s Refining and Marketing and Specialties segments in the first quarter. The company projects utilization of chemical plants at mid-70% for the March quarter, lower than the prior guidance of mid-90%.

The Zacks Consensus Estimate for realized refining margin in the Gulf Coast is currently pegged at $1.25 per barrel, indicating a significant decline from $6.76 in the year-ago period. The same on a worldwide basis is pegged at $3.43 per barrel, indicating a decline from the year-ago level of $7.11.

Markedly, the company projects adjusted net loss of $550-$700 million for the first quarter. It came up with adjusted net income of $450 million in the year-ago period.

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 chances of an earnings beat. That is not the case here as you will see below.

Earnings ESP: The company’s Earnings ESP is -27.41%. This is because the Most Accurate Estimate is currently pegged at a loss of $1.41 per share, wider than the Zacks Consensus Estimate of a loss of $1.11. 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 #3.

Stocks to Consider

While an 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:

EOG Resources, Inc. EOG has an Earnings ESP of +2.04% and a Zacks Rank of 1. It is scheduled to report first-quarter results on May 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Continental Resources, Inc. CLR has an Earnings ESP of +23.18% and a Zacks Rank #2. The firm is scheduled to release quarterly earnings on Apr 28.

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EOG Resources, Inc. (EOG) : Free Stock Analysis Report

Continental Resources, Inc. (CLR) : Free Stock Analysis Report

Phillips 66 (PSX) : Free Stock Analysis Report

Phillips 66 Partners LP (PSXP) : Free Stock Analysis Report

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