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Phillips 66’s 4Q16 Results: What Happened to PSX’s Earnings?

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Feb. 6 2017, Published 3:28 p.m. ET

Phillips 66’s 4Q16 estimated and actual performance

Phillips 66 (PSX) posted its 4Q16 results on February 3, 2017. Before we proceed with the earnings review, let’s quickly examine PSX’s 4Q16 performance versus its estimates.

In 4Q16, PSX’s revenues surpassed Wall Street analysts’ estimates by 5%. But its 4Q16 adjusted EPS (earnings per share) of $0.16 missed estimates of $0.40. Also, the company’s 4Q16 EPS was 88% lower than its 4Q15 adjusted EPS. PSX’s refining margins fell in 4Q16 over 4Q15. In fact, the 4Q16 margin is PSX’s lowest realized refining margin in the past two years.

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4Q16 earnings review

In 4Q16, PSX’s adjusted net income of $83 million fell 88% YoY (year-over-year). The fall was led by an across-the-board decline in its segmental earnings. All the segments—Midstream, Chemicals, Marketing, and Refining—witnessed YoY declines in earnings.

Adjusted income from Phillips 66’s (PSX) Refining segment nosedived to a loss in 4Q16, as compared to $376 million earnings in 4Q15. This was due to a fall in PSX’s refining margins by 31% YoY to $6.5 per barrel in 4Q16. The adjusted income from its Midstream and Chemical segments fell 21% and 32%, respectively, YoY in 4Q16. The company’s adjusted income from its Marketing segment fell 38% from 4Q15 to $140 million in 4Q16.

Peers Marathon Petroleum (MPC) and Valero Energy (VLO) posted 48% and 55% respective YoY falls in EPS in 4Q16, and Delek US Holdings (DK) and Tesoro (TSO) are expected to post losses in 4Q16.

For exposure to refining sector stocks, you can consider the Vanguard Energy ETF (VDE), which has ~8% exposure to the industry.

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