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Phillips 66 May Post Lower EPS Decline than VLO and HFC in Q1

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Peer comparison

Now we’ll review Phillips 66’s (PSX) earnings estimate for the first quarter. PSX’s peer Marathon Petroleum (MPC) is expected to see a rise in earnings in Q1. However, HollyFrontier (HFC) and Valero Energy’s (VLO) earnings could fall by 23% YoY and 56% YoY, respectively, in the quarter.

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Phillips 66’s Q1 2019 estimates

According to Wall Street estimates, Phillips 66 (PSX) is estimated to report EPS of $0.82 in Q1 2019, which is 21% lower than its Q1 2018 adjusted EPS. Also, it is 83% lower than the Q4 2018 adjusted EPS. Phillips 66’s revenues are estimated to be around $24.5 billion in Q1 2019, about 2% higher than revenues in Q1 2018.

In Q1 2019, Phillips 66’s refining margins could be lower due to weaker refining conditions. The benchmark crack, the US Gulf Coast WTI 3-2-1, fell by 3% over Q1 2018 to $14.6 per barrel in Q1 2019. The US Gulf Coast is a significant refining area for Phillips 66, which accounts for approximately 36% of its crude oil throughput. Thus, the year-over-year fall in the benchmark crack in the region points towards a possible decline in Phillips 66’s refining margin in Q1 2019.

However, Phillips 66’s chemicals, midstream, and marketing segments could support the company’s earnings growth in Q1 2019. These segments’ combined earnings stood at $0.8 billion in the first quarter, $0.8 billion in the second quarter, $1.0 billion in the third quarter, and $1.1 billion in the fourth quarter of 2018. These earnings suggest a steadily rising earnings stream for the company.

Thus, weakness in refining earnings could be partly offset by rising income in other segments.

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