TD Cowen adjusted its outlook on Phillips 66 (NYSE:PSX), reducing the stock's price target from $162.00 to $150.00, while maintaining a Buy rating. The revision comes as the firm reevaluates Phillips 66's financial model to include the company's new Renewable Fuels (RF) segment.
The analysis of the company's recent financial results indicates a shift in earnings, with a $65 million per quarter increase in the Refining segment and a $40 million decrease in Marketing.
The firm's assessment also noted a decrease in refining operating expenses by $0.20 per barrel. The adjustment reflects the reclassification of earnings among Phillips 66's business segments and takes into account the introduction of the RF segment into the company's portfolio.
Phillips 66 has introduced a new refining margin indicator that implies a 100% capture rate going back to the first quarter of 2023. This new metric suggests that the company has been fully realizing potential profits from its refining margins since that period.
The revision of the price target to $150.00 by TD Cowen is based on these recent changes and financial indicators. Despite the reduction in the price target, the firm continues to recommend a Buy rating on Phillips 66 shares, signaling confidence in the stock's future performance.
Investors and market watchers will be observing the impact of the new RF segment and refining margin indicator on Phillips 66's financial outcomes, as well as the company's ability to adjust to changes within its operational structure.
Phillips 66 reported strong second-quarter financial results, including adjusted earnings of $984 million or $2.31 per share and an operating cash flow of $2.1 billion. The company returned $1.3 billion to shareholders this quarter and aims to reach a target of $13 billion to $15 billion by year-end.
Phillips 66 made strategic moves in the Midstream sector, including the acquisition of Pinnacle Midstream and the sale of a stake in the Rockies Express Pipeline. The company also made advancements in renewable energy, with the Rodeo Renewable Energy Complex operating at full capacity, processing 50,000 barrels per day of renewable feedstocks.
Analysts noted that Phillips 66 is on track to achieve a $1.4 billion run rate savings target with $400 million in cost reductions realized. The company expects to generate $14 billion in EBITDA by 2025 and aims to reach $3.6 billion in EBITDA in the midstream segment.
InvestingPro Insights
In light of TD Cowen's recent adjustment of Phillips 66's price target, reviewing real-time data from InvestingPro may offer additional insights for investors. With a market capitalization of $53.11 billion, Phillips 66 demonstrates significant scale in the industry. The company's P/E ratio stands at 10.71, which adjusts slightly to 10.14 when looking at the last twelve months as of Q2 2024. This slight adjustment suggests a modest change in earnings valuation over time.
Phillips 66's revenue for the last twelve months as of Q2 2024 was $151.85 billion, with a slight revenue decline of 1.85%. However, the quarterly revenue growth shows an increase of 8.66%, indicating some short-term positive momentum. The gross profit margin at nearly 11% is a critical figure, reflecting the company's efficiency in managing its cost of goods sold. The dividend yield of 3.63%, coupled with a dividend growth of 9.52%, may appeal to income-focused investors.
One InvestingPro Tip to consider is the fair value estimate, which is currently at $131.78, according to InvestingPro's metrics. This is below the analyst target of $154 but above the previous close price of $126.88, suggesting potential for growth. Additionally, the negative PEG ratio of -0.21 indicates that the market may be expecting lower growth relative to the company's earnings. Investors should note that Phillips 66 is trading at 72.89% of its 52-week high, which could imply room for price recovery.
For those considering investing in Phillips 66, there are further InvestingPro Tips available, which can provide more detailed analysis and guidance. Currently, InvestingPro offers an additional 20+ tips for investors to explore, which can be accessed through the InvestingPro platform.
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