|Bid||92.81 x 800|
|Ask||92.91 x 1200|
|Day's Range||92.17 - 93.27|
|52 Week Range||89.14 - 123.97|
|Beta (3Y Monthly)||0.86|
|PE Ratio (TTM)||6.86|
|Forward Dividend & Yield||3.20 (3.31%)|
|1y Target Est||N/A|
In the previous part, we reviewed refining stocks’ dividend yield trends. Now, we’ll discuss Marathon Petroleum (MPC), HollyFrontier (HFC), Valero Energy (VLO), and Phillips 66’s (PSX) forward valuations. These refiners’ average forward EV-to-EBITDA multiple and average forward PE multiple are 5.8x and 9.0x, respectively.
Marathon Petroleum (MPC), Valero Energy (VLO), Phillips 66 (PSX), and HollyFrontier (HFC) have paid dividends regularly in the past few years. Before we discuss their dividend yields, let’s look at their dividend payments in the fourth quarter.
The refining yield shows the volumes of various refined products produced. Higher complexity refineries (with more and advanced oil processing units) produce a higher amount of lighter refined products like gasoline. Lighter refined products fetch higher realizations than the heavier ones. So, the higher the production of lighter products, the higher refiners’ revenues will be.
So far, the implied volatilities in refining stocks have risen in the fourth quarter. The implied volatility in Marathon Petroleum (MPC) has increased by 11.7 percentage points since October 1 to the current level of 39.3%—the highest rise among its peers. The implied volatility in Phillips 66 (PSX) has risen by 9.1 percentage points to 29.5%.
So far in the fourth quarter, Marathon Petroleum (MPC), Valero Energy (VLO), HollyFrontier (HFC), and Phillips 66 (PSX) have fallen. We discussed the stocks’ returns in the previous part. In this part, we’ll discuss the trend in their moving averages.
On November 19, Brent crude oil January futures settled ~$9.6 higher than the WTI crude oil January futures. On November 12, the spread was at ~$10. Between November 12 and November 19, Brent crude oil January futures fell 4.7%, which was ten basis points less than the fall in WTI or US crude oil January futures.
So far in the fourth quarter (since October 1), Valero Energy (VLO) stock has fallen 26.3%—the highest among its peers including Marathon Petroleum (MPC), Phillips 66 (PSX), and HollyFrontier (HFC). So far, Marathon Petroleum, Phillips 66, and HollyFrontier have declined 20.6%, 15.6%, and 8.2%, respectively, in the fourth quarter. The SPDR S&P 500 ETF (SPY), which closely resembles the S&P 500 Index, has fallen 6.2% in the fourth quarter.
In this article, we’ll look at the region-wise realized refining margins. Phillips 66’s worldwide refining margin rose by $2.9 per barrel, or 27% YoY, to $13.4 per barrel in Q3 2018, which was due to the rise in refining margins in three of its four operating regions. The Central Corridor region rose the most by $9.6 per barrel or 68% YoY to $23.6 per barrel in Q3 2018. The area accounted for 26% of Phillips 66’s oil throughput in Q3 2018, the second-highest compared to other regions.
In the previous part of this series, we discussed Phillips 66’s (PSX) improving liquidity position. In this part, we look at Phillips 66’s evolving segmental dynamics. Phillips 66’s Refining segment, which contributed 16% to overall earnings in Q1 2018, contributed 63% in Q3 2018.
Phillips 66’s (PSX) cash from operations doubled year-over-year to $3.4 billion in the first nine months of 2018. In the same period, Phillips 66’s cash outflows from investing activities rose from $0.7 billion to $1.5 billion. Phillips 66’s cash outflows from financing rose steeply by 85% YoY to $4.1 billion in the first nine months.
Moody's Investors Service (Moody's) changed the rating outlook for DCP Midstream, LP (DCP) and DCP Midstream Operating LP to positive from stable. Moody's also affirmed the ratings at DCP, including the Ba2 Corporate Family Rating, Ba2-PD Probability of Default Rating, B1 rating on the perpetual preferred units and SGL-3 Speculative Grade Liquidity (SGL) Rating.
Phillips 66’s (PSX) net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) stood at 2.0x in Q3 2018, higher than the average peer ratio of 1.2x. The peer average considers six American refining companies. The ratio displays a firm’s debt as a multiple of its earnings.
Phillips 66’s mean price target of $130 per share implies around a 36% gain from the current level. Half of Wall Street analysts have “hold” ratings on Phillips 66 stock, which could be due to Phillips 66’s high valuations.
Phillips 66’s (PSX) capex stood at $779 million in the third quarter of 2018. In Q3 2018, in the refining segment, Phillips 66 incurred capex on modernization and sustenance spending. Also, Phillips 66 is setting up a 25,000-barrel-per-day isomerization unit at Lake Charles Refinery, which is expected to be completed by Q3 2019.
Solid third quarter earnings from the major oil and gas refiners haven't fended off tanking oil prices and a "risk-off" market environment that saw global equities sell off sharply in October. Warren Buffet's Berkshire Hathaway Inc. ( BRK.B) disclosed in June that it had reduced its holdings by 36% in the Houston-based company.
Phillips 66 (PSX) seems to be a good value pick, as it has decent revenue metrics to back up its earnings, and is seeing solid earnings estimate revisions as well.
Berkshire Hathaway continues to shrink its stake in Phillips 66. That doesn't mean we little guys should follow suit.
Warren Buffett, chairman and CEO of Berkshire Hathaway (BRK.B, $216.03), took a few more bites of Apple (AAPL) stock in the most recent quarter. But the big news is that he's bonkers for bank stocks. Berkshire Hathaway added to or bought new stakes in five of the nation's largest commercial banks in the third quarter ended Sept. 30. The holding company also made bets on investment banking, custodial banking and insurance. In addition to finding value in select pockets of the financial sector, the Oracle of Omaha also made a surprising new bet on a technology stock. The world's greatest value investor made several noteworthy moves in the third quarter, according to a new Berkshire Hathaway 13F regulatory filing. (Large investors such as Berkshire are required to disclose their holdings to the Securities and Exchange Commission every three months.) The biggest changes to Berkshire's portfolio came in the form of additional stakes and new investments as the company seeks to deploy a hoard of cash that stood at more than $100 billion at the end of the September quarter. But Berkshire also did a little trimming. Since it can be instructive to see what Buffett has been up to, we took a closer look at what Berkshire has been buying and selling. Keep in mind that not all "Warren Buffett stocks" are actually his picks - some smaller positions are believed to be handled by lieutenants Ted Weschler and Todd Combs. That said, here are the most notable recent changes to Berkshire Hathaway's stock holdings. SEE ALSO: 101 Best Dividend Stocks to Buy for 2019 and Beyond
The refining yield shows the quantity and quality of various refined products produced. In the third quarter, Valero Energy’s (VLO) gasoline production stood at 47% of its total refined products produced, higher than Marathon Petroleum’s (MPC) and Phillips 66’s (PSX) gasoline productions. Valero’s distillate production stood at 38%, leaving its other production at only 15%, the lowest compared to MPC and PSX.
Oil movements are quite a chaos right now, thanks to ramped-up production around the globe and weakening demand, particularly from developing economies.
In this article, we’ll compare the gross refining margins of leading American downstream companies. HollyFrontier (HFC) scored the highest gross refining margin in the third quarter, followed by Marathon Petroleum (MPC), Phillips 66 (PSX), and Valero Energy (VLO).