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Phillips 66’s Earnings Surpass Wall Street’s Expectations

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First-quarter estimated and actual performances

Phillips 66 (PSX) posted its first-quarter earnings results on April 30, 2019. Its first-quarter revenue of $23.1 billion reflected a fall of ~2% YoY (year-over-year). Its adjusted EPS stood at $0.40 in the first quarter of 2019, exceeding Wall Street analysts’ consensus estimate of $0.34. However, the company’s first-quarter adjusted EPS fell 62% YoY.

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First-quarter earnings review

Phillips 66’s adjusted net earnings attributable to its shareholders fell from $0.6 billion in the first quarter of 2018 to $0.3 billion in the first quarter of 2019 due to lower adjusted pretax earnings. Phillips 66’s adjusted pretax earnings fell due to YoY falls in its Refining, Chemicals, and Marketing earnings partially offset by a YoY rise in its Midstream earnings.

Phillips 66’s Refining segment’s earnings fell to -$219 million in the first quarter. Lower refining margins led to subdued earnings in the segment. The company’s realized refining margin contracted 22% YoY to $7.2 per barrel in the first quarter of 2019. The Central Corridor’s refining margin contracted the most in the quarter. Lower Canadian crude oil spreads affected its refining margin.

Phillips 66’s Chemicals segment’s adjusted earnings fell 21% YoY to $227 million in the first quarter, and its Marketing segment’s adjusted earnings fell 8% YoY in the quarter. In contrast, its Midstream segment’s earnings rose 13% YoY.

In the first quarter, Phillips 66 returned $708 million to its shareholders in the form of dividends ($364 million) and share repurchases ($344 million).

Peers’ performances

Phillips 66’s peer Valero Energy’s (VLO) first-quarter EPS fell 66% YoY. HollyFrontier’s (HFC) EPS are expected to fall 44% YoY in the quarter. Marathon Petroleum’s (MPC) and Delek US Holdings’ (DK) earnings are, however, expected to rise. MPC’s EPS could rise from $0.04 in the first quarter of 2018 to $0.06 in the first quarter of 2019. Delek is expected to post EPS of $0.45 in the first quarter compared to a loss in the first quarter of 2018.

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