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Time to Get Ready for Phillips 66’s 1Q17 Earnings

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Time to Get Ready for Phillips 66’s 1Q17 Earnings PART 1 OF 7

Phillips 66’s 1Q17 Earnings: Will It Be a Boring Show?

Phillips 66’s estimated and actual performance in 4Q16

Phillips 66 (PSX) is expected to post its 1Q17 results on April 28, 2017. Before we look at 1Q17 estimates, let’s recap PSX’s 4Q16 performance and then compare it to 1Q17 expectations.

In 4Q16, PSX’s revenues exceeded Wall Street analysts’ estimates by 5.0%. But its 4Q16 adjusted EPS (earnings per share) of $0.16 fell short of the $0.40 estimate. Its 4Q16 adjusted EPS was 88.0% less than 4Q15. Its refining margin fell in 4Q16 over 4Q15. In fact, its 4Q16 realized refining margin was the weakest for the past two years.

Phillips 66’s 1Q17 Earnings: Will It Be a Boring Show?

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In 4Q16, PSX’s adjusted net income of $83.0 million fell 88.0% YoY (year-over-year). The fall was led by an across-the-board fall in its segmental earnings. All its segments—Midstream, Chemicals, Refining, and Marketing and Specialties—saw their earnings fall YoY.

Phillips 66’s 1Q17 estimates

According to Wall Street analysts, Phillips 66 (PSX) is expected to post EPS (earnings per share) of $0.11 in 1Q17. That’s 32.0% lower than adjusted EPS in 4Q16. It’s also 84.0% lower than adjusted EPS for 1Q16. PSX’s revenues are estimated to be about $27.0 billion in 1Q17, which is about 52.0% higher than 1Q16 revenues.

In 1Q17, the average regional refining cracks have been higher than 1Q16. That’s evident from the YOY higher margin indicators of leading oil refiners. However, refining earnings will likely be impacted by a volatile RIN (renewable identification number) burden. We’ll take a closer look at the refining margin outlook in the next part of this series.

Peer performances in 1Q17

PSX’s peer Tesoro (TSO) is expected to post 66.0% lower EPS YoY in 1Q17. Marathon Petroleum (MPC) is expected to post a loss in the quarter. HollyFrontier (HFC) and PBF Energy (PBF) are also expected to post losses in 1Q17. However, Valero Energy (VLO) is expected to post a rise in EPS of 2.0% YoY in 1Q17.

For exposure to core S&P 500 index stocks, you can consider the SPDR S&P 500 ETF (SPY). SPY has a ~7.0% exposure to energy sector stocks, including PSX, TSO, VLO, and MPC. However, if you’re looking for exposure to mid-cap stocks, you can consider the SPDR S&P MidCap 400 ETF (MDY). MDY has a ~4.0% exposure to energy sector stocks, including HFC.

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