Why Wall Street Analysts Have Mixed Opinions about Phillips 66



Analysts’ opinion on Phillips 66

18 Wall Street analysts cover Phillips 66 stock (PSX). The analyst rating chart below shows that nine (or 50%) analysts have given the stock a “buy” or “strong buy” rating. Another nine analysts have given it a “hold” rating. None of the analysts have given it a “sell” or “strong sell” rating. Phillips 66’s mean price target of $130 per share implies around a 36% gain from the current level.

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Why Wall Street analysts have a mixed opinion on Phillips 66

Half of Wall Street analysts have “hold” ratings on Phillips 66 stock, which could be due to Phillips 66’s high valuations. The stock trades at a premium to its peer average. Phillips 66 stock trades at a forward PE of 9.8x, above the American refiner average of 8.2x.

However, Phillips 66 also has 50% “buy” ratings, which could be due to the company’s growth activities and financial strength. Phillips 66 has expansion projects in the midstream segment and modernization projects in the refining segment, which we discussed in the previous part of this series. Wall Street analysts expect Phillips 66’s earnings per share to grow by 99% in 2018, a growth rate above the peer average.

Further, the company has a comfortable debt and liquidity position, which we’ll discuss in the next two parts of this series. Also, Phillips has a diversified earnings model, which we’ll address in part five of the series.

Wall Street analysts presumably appreciate Phillips 66’s expansion plans and financials but have a mixed opinion due to the stock’s premium valuation.

Analyst ratings of peers

Phillips 66’s peers Marathon Petroleum (MPC) and Valero Energy (VLO) have been rated as a “buy” by 100% and 63% of analysts, respectively. Delek US Holdings (DK), PBF Energy (PBF), and HollyFrontier (HFC) have been rated as a “buy” by 93%, 44%, and 25% of analysts, respectively.


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