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Anticipating 3Q15 Earnings: Phillips 66’s Stock Performance in 2015

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Phillips 66’s 3Q15 earnings

Phillips 66 (PSX) is expected to release its earnings for the third quarter of 2015 on October 30, 2015. In this series, we’ll analyze the company’s 3Q15 earnings estimates and segment-wise performance in the current crude oil and refined product prices environment.

Let’s start by looking at PSX’s year-to-date returns. The company’s stock closed at ~$83 on October 26.

As the graph above shows, Chevron Corporation (CVX) has returned ~15% since January 2015. We should also note that the company has provided better returns when compared to its peer Marathon Petroleum (MPC), which has returned ~6.3% since the beginning of this year. Peers such as Valero Energy (VLO) and Tesoro Corp (TSO), on the other hand, have given better returns—approximately 23% and 37%, respectively, since the beginning of 2015.

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PSX compared to the broader sector

In a comparison of Phillips 66’s stock performance to that of the broader energy sector, or the Energy Select Sector SPDR ETF (XLE), we should note that so far in 2015, PSX has outperformed XLE, which has returned a negative of ~16% since January. The reason for this that XLE holds many pure-play upstream oil and gas companies that have directly been impacted by plunging crude oil prices, pulling the fund lower.

Additionally, XLE is market-weighted, with its top five holdings constituting ~45% of the fund. Its top two holdings—Exxon Mobil Corporation (XOM) and Chevron (CVX)—alone constitute ~30% of the fund. While these two are integrated oil and gas companies, which means they have downstream operations, weaker revenues in their upstream operations (due to lower realized prizes) can take a toll on their overall earnings.

PSX makes up ~3% of XLE. Chevron is also expected to release its earnings on October 30. To learn more about Chevron, read the series What to Watch for in Chevron’s 3Q15 Earnings.

Low crude oil prices and PSX

Downstream companies like Phillips 66 tend to benefit when crude oil prices fall. So the lower price of crude oil, which is an input cost for refiners or downstream companies, could widen their refiner margins. However, for wider margins, prices of refined products such as gasoline and diesel have to be relatively steady or else rise. That said, refined products broadly track crude oil prices, which could translate into lower realized prices for refined products as well in the long run.

In the next part of this series, we’ll look at Phillips 66’s revenue estimates for 3Q15.

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