Phillips 66’s implied gains
In this part, we’ll discuss Phillips 66’s (PSX) implied gains. Phillips 66 is the second-highest refiner among the six refining stocks. Marathon Petroleum (MPC) has the highest implied gains of 59% based on analysts’ mean target price.
Phillips 66 has 40% implied gains based on its target price. The stock has fallen 30% in the past year. Analysts’ mean target price on Phillips 66 stock has mainly been steady during the same period.
Phillips 66 has an integrated and diversified earnings model. Phillips 66 has refining, midstream, chemicals, and marketing earnings. During periods with lower refining earnings, other segments continue to contribute to the overall profits and partially shield the company from refining crack volatility.
Earnings growth, valuation, and dividend yield
Phillips 66 plans to expand through capex and acquisitions. For more on the company’s growth, read Phillips 66 Focuses on Midstream Expansion and Refining Upgrades.
Analysts expect Phillips 66’s earnings to fall 37% to $7.4 per share in 2019. In the first quarter, Phillips 66’s adjusted EPS was $0.4 per share. The company trades at a forward PE ratio of 9.9x, which is above the peer average of 9.3x.
In the past few years, Phillips 66’s returns to shareholders have risen. In the first quarter, Phillips 66’s cash outflows for dividend and share repurchases were ~$364 million and ~$344 million, respectively. Since May 2012, the company’s dividends have grown at a compound annual growth rate of 25%. Phillips 66’s current dividend yield is 4.2%, which is above the peer average of 3.8%.
Phillips 66 has second-highest implied gains and a higher dividend yield. However, the stock has an above-average earnings decline rate and high valuations.