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Could Phillips 66’s Earnings Improve in the Fourth Quarter?

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Phillips 66’s estimated and actual performance in the third quarter

Phillips 66 (PSX) is set to post its fourth-quarter results on February 8. In the third quarter, Phillips 66’s revenue rose ~16% YoY (year-over-year) to $30 billion, and its adjusted EPS rose 87% YoY to $3.10, beating analysts’ estimate of $2.50. The company’s adjusted net midstream, chemical, refining, marketing, and specialty earnings all rose. Its adjusted net income attributable to shareholders rose YoY to $1.5 billion from $0.9 billion.

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Fourth-quarter estimates

In the fourth quarter, analysts expect Phillips 66’s EPS to rise 167% YoY and fall 8% sequentially to $2.90. They expect its revenue to fall 6% YoY to ~$28.3 billion.

Leading American refiners’ margin indicators weakened YoY in the fourth quarter, and the US Gulf Coast WTI 3-2-1 crack narrowed YoY, suggesting weaker refining margins and earnings for Phillips 66. However, Phillips 66’s chemicals, midstream, and marketing earnings could support its total earnings, which we’ll discuss in the next part of this series.

Expectations for peers

In the fourth quarter, analysts expect Valero Energy’s (VLO) EPS to fall 16% YoY, and HollyFrontier’s (HFC), Delek US Holdings’ (DK), and Marathon Petroleum’s (MPC) to rise 168%, 158%, and 77% YoY, respectively.

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