Has 2017 Started on the Right Foot for Phillips 66?

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Has 2017 Started on the Right Foot for Phillips 66? PART 1 OF 10

Why Has Phillips 66 Stock Declined in 2017?

Phillips 66 stock performance

Phillips 66 (PSX) stock has fallen 8% year-to-date since January 3, 2017, the highest drop among its peers Tesoro (TSO), Valero Energy (VLO), and Marathon Petroleum (MPC), the leading American downstream companies. Let’s look at what led to a fall in Phillips 66 stock.

Downstream stocks usually perform according to the refining crack environment. Similar to what we saw in 2016, refining stocks have been putting up a volatile performance on the back of an unsteady crack environment since February 2017. In 2016, refining cracks witnessed a roller coaster ride, ending with a recovery in December. Like the benchmark crack, the US Gulf Coast WTI 3-2-1 rose in December 2016.

Why Has Phillips 66 Stock Declined in 2017?

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However, in 2017, the USGC WTI 3-2-1 crack declined and has dropped 15% since January 3, 2017. The US Gulf Coast is an important refining area for Phillips 66 (PSX), which accounted for ~34% of its crude oil throughput in 2016. The weakness in the crack environment likely led to an 8% year-to-date fall in Phillips 66 stock.

Phillips 66 announced its 4Q16 results in February 2017, missing its earnings estimate. For more on this, please read Phillips 66’s 4Q16 Results: What Happened to PSX’s Earnings? Lower-than-expected results could have led to a further decline in the stock.

Peers’ stock performance

Since January 3, 2017, Marathon Petroleum, Tesoro, and Valero Energy have fallen 3%, 4%, and 2%, respectively. Among the smaller downstream refiners, HollyFrontier (HFC) and PBF Energy (PBF) fell even more sharply—16% and 21%, respectively—in the same period.

However, the broader market indicator, the SPDR S&P 500 ETF (SPY), has risen 6% since January 3, 2017. SPY has ~7% exposure to energy sector stocks, including PSX, VLO, TSO, and MPC.

PSX’s moving averages

Phillips 66 (PSX) stock was in line with the unstable crack environment, and it intermittently crossed over and broke below its 50-day and 200-day moving averages in 2016. However, due to a fall in its stock price in 1Q17, Phillips 66 stock broke below its 50-day and 200-day moving averages. Currently, PSX trades below both averages.

Series overview

In this series, we’ll provide an update on Phillips 66’s (PSX) market performance. In the next few parts, we’ll examine analyst ratings for Phillips 66 (PSX), PSX’s dividend yield, and its PEG ratio as compared to its peers.

We’ll also look at PSX’s valuations, beta position, short interest changes, institutional ownership status, and implied volatility movements. We’ll conclude by looking at the correlation of Phillips 66 stock to crude oil.

Move on to the next part to see why the majority of analysts rate PSX as a “hold.”


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