On Tuesday, Phillips 66 (NYSE:PSX) received a reaffirmed Overweight rating from Piper Sandler, with a steady price target of $144.00. The firm revised its estimates for the company, taking into account the end-of-quarter market valuation and adjustments to operational expectations.
The analysis indicated that despite Phillips 66 showing strength in marketing and chemical earnings, the refining margins were weaker than anticipated. This was attributed to a combination of factors including weaker indicators in the second half of September, persistent challenges from narrow differentials, crude backwardation, subdued jet fuel margins, and difficulties with secondary products.
The revised estimates for Phillips 66's earnings per share (EPS) and earnings before interest, taxes, depreciation, and amortization (EBITDA) now stand at $1.47 per share and $1,768 million, respectively. This represents a decrease from the previous estimates of $1.67 per share and $1,899 million.
"We continue to view PSX as relatively defensive (and relatively inexpensive) into a challenging 2025. Maintain Overweight," said the analysts.
In other recent news, Phillips 66 reported robust second-quarter financial results with 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. Barclays adjusted its outlook on Phillips 66, reducing the price target on the company's stock to $133.00 from the previous $138.00 while maintaining an Equalweight rating. TD Cowen also revised its price target for Phillips 66 from $162.00 to $150.00, maintaining a Buy rating.
The company issued $1.8 billion in senior notes as part of its broader strategy to manage its capital structure and finance ongoing operations. Phillips 66 is on track to achieve a $1.4 billion run rate savings target with $400 million in cost reductions already 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
Phillips 66's financial metrics and market performance offer additional context to Piper Sandler's analysis. The company's P/E ratio of 11.78 suggests it may be undervalued relative to its earnings, aligning with Piper Sandler's view of the stock as "relatively inexpensive." This is further supported by the company's market cap of $57.97 billion and an InvestingPro Fair Value of $136.21, close to its previous closing price of $138.5.
The company's revenue for the last twelve months as of Q2 2024 stood at $151.85 billion, with a gross profit of $16.66 billion. While the revenue growth was slightly negative at -1.85% over this period, the quarterly revenue growth of 8.66% in Q2 2024 indicates a potential turnaround, which could support the optimistic outlook.
InvestingPro Tips highlight Phillips 66's strong shareholder returns, with a dividend yield of 3.32% and a dividend growth of 9.52% over the last twelve months. This reinforces Piper Sandler's view of Phillips 66 as defensively positioned. Another tip notes that analysts have recently revised their earnings expectations upwards, which contrasts with Piper Sandler's downward revision but suggests overall positive sentiment.
For investors seeking a deeper understanding of Phillips 66's financial health and market position, InvestingPro offers 17 additional tips, providing a comprehensive analysis to inform investment decisions.
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