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Why Phillips 66’s Diversified Growth Model Matters

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Part 4
Why Phillips 66’s Diversified Growth Model Matters PART 4 OF 12

Where Phillips 66’s Analysts Are Leaning Now

Analysts’ opinions on Phillips 66

Phillips 66 (PSX) is covered by 19 Wall Street analysts. The analyst rating chart below shows that six (32%) analysts have given a “buy” or “strong buy” recommendation on the stock. The remaining analysts, representing the majority, have given a “hold” recommendation on the stock.

Where Phillips 66&#8217;s Analysts Are Leaning Now

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Compared with September 2016, PSX’s ratings have strengthened, with more “buy” ratings and fewer “hold” ratings. Jefferies recently cut PSX’s target price to $76 per share. The firm now has a “hold” rating on the stock.

RBC, which has “sector perform” rating on the stock, has raised PSX’s target price to $88 per share from $87 per share. Barclays raised PSX’s target price from $87 to $89 per share.

PSX’s mean price target of $89 per share implies a ~5% gain from the current level.

Analyst ratings of peers

Peers Marathon Petroleum (MPC), Valero Energy (VLO), and Andeavor (ANDV) have been rated as “buy” by 84%, 52%, and 88% of analysts, respectively. PBF Energy (PBF) and HollyFrontier (HFC) have been rated as a “buy” by 29% of their respective analysts.

Why most rate PSX a “hold”

Phillips 66’s (PSX) development plans across its business segments make its earnings model diversified and growth-oriented, and its inorganic and organic growth strategy in midstream should help PSX expand steady midstream earnings. Meanwhile, PSX’s continuing expansion and modernization activities in chemicals and refining should also magnify earnings.

But most analysts are rating Phillips 66 as a “hold” likely due to its higher valuations, which apparently factor in the company’s expected growth. At the same time, analysts are revising ratings and target prices to reflect deviations from the predicted growth. The unpredictable refining environment, which has been affected by events including Hurricane Harvey, is sharply altering the refining earnings of downstream companies, which is ultimately impacting these companies’ valuations, estimates, and ratings.

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