Why Hold Strategy is Apt for Phillips 66 (PSX) Stock Now
Phillips 66 PSX has witnessed upward earnings estimate revisions for 2023 and 2024 over the past 30 days.
What's Favoring the Stock?
PSX has a diversified business model, with a significant presence in businesses related to refining midstream, chemicals and marketing & specialties. In each of the operations, Phillips 66 has a solid footprint pertaining to safety, profitability, size and competitive strengths.
It is focusing more on businesses like midstream, renewables and chemicals, which makes the business model more stable. Having 72,000 miles of U.S. pipeline network, the company expects roughly 80% of its midstream contracts to be fee-based, signifying a stable business model with low sensitivity to commodity price fluctuations.
Phillips 66 has a strong focus on returning capital to shareholders. Since the authorization of $20 billion of share buybacks in July 2012, the energy major has repurchased shares worth $16.2 billion. The remaining program will continue and has no expiration date.
Risks
Phillips 66’s refining business is exposed to extreme volatility in commodity prices since the end products are made with raw crude oil. Rising input costs hurt the company’s refining business.
Zacks Rank & Stocks to Consider
It carries a Zacks Rank #3 (Hold).
Better-ranked players in the energy space include Kinder Morgan, Inc. KMI, Profire Energy, Inc. PFIE and Pioneer Natural Resources Company PXD. While Kinder Morgan and Profire Energy carry a Zacks Rank #2 (Buy), Pioneer Natural sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
With its operating interests in oil and gas pipeline networks spread across 83,000 miles, Kinder Morgan is a leading energy infrastructure company in North America. It derives most of its earnings from take-or-pay contracts, generating stable fee-based revenues.
Profire Energy is mainly focused on the oil and gas industry’s upstream, midstream and downstream transmission segments. PFIE has boasted that its legacy business is doing extremely well, thanks to the resumption of maintenance work of exploration and production players.
Pioneer Natural has a strong presence in the low-cost, oil-rich Midland basin — a sub-basin of the broader Permian. The upstream energy player has a massive inventory of premium wells that will likely generate significant returns for the company.
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Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
Kinder Morgan, Inc. (KMI) : Free Stock Analysis Report
Phillips 66 (PSX) : Free Stock Analysis Report
Profire Energy, Inc. (PFIE) : Free Stock Analysis Report
