Phillips 66’s 4Q15 Earnings Are Higher than Estimated



4Q15 estimated and actual performance

Phillips 66 (PSX) posted its 4Q15 results on January 29, 2016. Before we proceed with an earnings review, let’s quickly examine PSX’s 4Q15 performance versus estimates.

In 4Q15, PSX’s revenues missed Wall Street analysts’ estimates by 5%. However, its 4Q15 adjusted earnings per share (or EPS) stood at $1.31, around 4.2% higher than its estimated EPS of $1.26. However, the company’s 4Q15 EPS were 20% lower than its 4Q14 adjusted EPS. PSX’s refining margins rose marginally in 4Q15 compared to 4Q14.

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PSX’s 4Q15 earnings were better than estimated

In 4Q15, PSX’s adjusted net income of $710 million fell by 22% compared to 4Q14. The fall was mainly led by the midstream, chemicals, and marketing segments. This was partially offset by a rise in adjusted income from the refining segment.

Refining margins rose marginally to $9.4 per barrel in 4Q15 compared to 4Q14. Adjusted income from PSX’s refining segment rose by 17% to $376 million. However, the company’s adjusted income from marketing segment fell by 30% over 4Q14 to $227 million in 4Q15. Additionally, the adjusted income from its midstream and chemical segments fell by 57% and 33%, respectively, in 4Q15 compared to 4Q14.

PSX’s refining margins fell sequentially, leading to lower earnings. PSX’s adjusted EPS fell by 57% in 4Q15 compared to 3Q15. This is similar to Valero Energy’s (VLO) adjusted EPS, which fell by 36% in 4Q15 over 3Q15.

Plus, per Wall Street analysts’ estimates, Marathon Petroleum (MPC) and Tesoro (TSO) are expected to post 64% and 68% lower EPS, respectively, in 4Q15 compared to 3Q15.

For exposure to refining sector stocks, you can consider the Vanguard Energy ETF (VDE). VDE has 11% exposure to the sector. VDE holds PSX, MPC, VLO, and TSO in its portfolio.

PSX’s yearly performance

In 2015, PSX’s revenues stood at $100 billion, missing estimates by 3%. However, stronger refining margins poured down to the bottom line, resulting in higher earnings.

In 2015, Phillips 66 reported a gross refining margin of $11.8 per barrel compared to $9.9 per barrel in 2014. PSX reported adjusted EPS of $7.7 in 2015, beating Wall Street analysts’ estimates by 1%. Also, its 2015 adjusted EPS were 16% higher than its 2014 adjusted EPS.


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