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What Led to Phillips 66’s Better-than-Expected 3Q17 Earnings?

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What Led to Phillips 66’s Better-than-Expected 3Q17 Earnings? PART 1 OF 5

What Led to Phillips 66’s Better-than-Expected 3Q17 Earnings?

Phillips 66’s 3Q17 estimated and actual performance

Phillips 66 (PSX) posted its 3Q17 results on October 27, 2017. Before we proceed with the earnings review, let’s quickly examine PSX’s 3Q17 performance versus its estimates.

In 3Q17, PSX’s revenues missed Wall Street analysts’ estimates by ~6%. However, its 3Q17 adjusted earnings per share (or EPS) of $1.66 surpassed consensus estimates of $1.57. Refining margins rose year-over-year in the third quarter. Also, the company’s 3Q17 EPS stood 58% higher than its 3Q16 adjusted EPS.

What Led to Phillips 66’s Better-than-Expected 3Q17 Earnings?

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Phillips 66’s 3Q17 earnings review

PSX’s adjusted net income rose from $556 million in 3Q16 to $858 million in 3Q17. The increase was mainly a result of the rise in adjusted refining earnings. However, adjusted marketing earnings, adjusted chemical earnings, and adjusted midstream earnings fell YoY.

Phillips 66’s (PSX) refining earnings rose a whopping 309% YoY in 3Q17, which was due to a rise in refining margins in the quarter. PSX’s refining margins rose steeply by 45% YoY to $10.5 per barrel in 3Q17. However, PSX’s adjusted income from its marketing segment fell 21% over 3Q16 to $211 million in 3Q17. PSX’s adjusted earnings from its midstream and chemical segments also rose 11% and 19%, respectively, in 3Q17 over 3Q16. We’ll look at details in the next part.

Marathon Petroleum’s (MPC) 3Q17 EPS was three times higher than its 3Q16 adjusted EPS. Also, Valero Energy (VLO) posted 54% higher EPS in 3Q17 over 3Q16. Analysts estimate that Andeavor (ANDV) and HollyFrontier (HFC) will post 128% and 135% higher EPS in 3Q17 on a YoY basis. Also, PBF Energy (PBF) and Delek US Holdings (DK) are expected to post positive earnings in 3Q17 compared to losses in 3Q16.

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