A month has gone by since the last earnings report for Phillips 66 (PSX). Shares have added about 0.8% in that time frame, underperforming 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 Beats on Q1 Earnings Estimates
Phillips 66 reported first-quarter 2023 adjusted earnings of $4.21 per share, beating the Zacks Consensus Estimate of $3.58. The bottom line improved from $1.32 per share in the year-ago quarter.
Total quarterly revenues of $35,089 million beat the Zacks Consensus Estimate of $29,756 million. However, the top line declined from the year-ago quarter’s $36,722 million.
Strong quarterly earnings can be primarily attributed to strong refining margins worldwide.
The segment generated adjusted pre-tax quarterly earnings of $678 million, up from $212 million in the year-ago quarter. Higher contributions from NGL and other aided the segment.
The unit recorded adjusted pre-tax earnings of $198 million, down from $396 million in the prior-year quarter. Lower margins and volumes primarily hurt the segment.
The segment reported adjusted pre-tax earnings of $1,608 million, up from $190 million in the year-ago quarter. It was backed by increased volumes and realized margins.
The segment’s realized refining margins worldwide improved to $20.72 per barrel from the year-ago quarter’s $10.83. The same in the Central Corridor and Atlantic Basin/Europe increased to $26.86 and $16.13 per barrel from the year-ago levels of $7.89 and $11.71, respectively.
In the Gulf Coast, the metric improved to $21.28 per barrel from $8.59 in the prior-year quarter. However, the West Coast witnessed a decline in margins from $17.74 per barrel in the year-ago quarter to $16.53 in the March-end quarter of 2023.
Marketing and Specialties
Pre-tax earnings increased to $426 million from $296 million in the year-ago quarter.
While realized marketing fuel margins in the United States increased to $2.30 per barrel from the year-ago quarter’s $1.59 per barrel, the same in the international markets increased to $6.45 from the year-ago level of $2.30.
Costs and Expenses
Total costs and expenses in the first quarter declined to $32,438 million from $35,894 million in the year-ago period.
For the reported quarter, Phillips 66 generated $1,199 million of net cash from operations, up from $1,136 million a year ago. The company’s capital expenditure and investments totaled $378 million. It paid out dividends of $486 million in the reported quarter.
As of Mar 31, 2023, cash and cash equivalents were $7 billion. Total debt was $18.5 billion, reflecting a consolidated debt to capitalization of 35%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -10.55% due to these changes.
Currently, Phillips 66 has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. 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.
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 belongs to the Zacks Oil and Gas - Refining and Marketing industry. Another stock from the same industry, Valero Energy (VLO), has gained 1.6% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.
Valero Energy reported revenues of $36.44 billion in the last reported quarter, representing a year-over-year change of -5.5%. EPS of $8.27 for the same period compares with $2.31 a year ago.
For the current quarter, Valero Energy is expected to post earnings of $5.65 per share, indicating a change of -50.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -8% over the last 30 days.
Valero Energy 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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