Phillips 66’s (PSX) earnings surprised Wall Street. The company’s adjusted EPS was at $3.1, which crushed analysts’ EPS of $2.6. Analysts expected a 16% YoY (year-over-year) fall in Phillips 66’s earnings. However, the company’s adjusted EPS rose 0.2%.
Phillips 66 stock is trading about 4% higher due to the earnings surprise. The stock opened about 1.4% higher today.
Phillips 66’s earnings review
The company’s adjusted earnings fell 3% YoY to $1.4 billion in the third quarter. Notably, the earnings fell due to a YoY fall in the earnings in Phillips 66’s Refining segment. The fall was partially offset by higher earnings in the company’s Midstream, Marketing, and Chemicals segments.
Phillips 66’s Refining earnings fell 34% YoY to $0.8 billion in the third quarter. Lower refining margins led to subdued earnings in the segment. The company’s realized refining margin fell 16% YoY to $11.2 per barrel in the third quarter. The Central Corridor refining margin fell the most in the quarter.
Phillips 66’s Chemicals earnings rose 2% YoY. The Midstream earnings rose 41% YoY, while the Marketing earnings rose 29% YoY in the quarter. Meanwhile, Midstream earnings rose due to more transportation and NGL earnings. The rise was partially offset by lower DCP Midstream earnings. The company’s Marketing earnings rose in the third quarter led by 8% YoY higher fuel sales volumes. Also, a 17% YoY wider fuel marketing margin in the US supported the earnings.
In the third quarter, Phillips 66 returned $841 million to its shareholders in the form of dividends ($402 million) and share repurchases ($439 million).
Refining margin fell
Phillips 66’s worldwide refining margin fell by $2.2 per barrel YoY to $11.2 per barrel in the third quarter. The decline was due to a fall in the company’s refining margins in two of its four operating regions.
The Central Corridor region saw the largest fall of 32% YoY to $16.0 per barrel in the third quarter. The area accounted for 23% of Phillips 66’s oil throughput in the quarter. The Gulf Coast, which refined 36% of the throughput, saw an 8% YoY fall in the margin to $8.3 per barrel in the quarter.
However, the Atlantic Basin/Europe, which processed 24% of Phillips 66’s throughput, saw a flat margin at $11.5 per barrel. Also, the margin in the company’s West Coast region rose 6% YoY to $10.1 per barrel in the quarter. The region accounted for 17% of Phillips 66’s total throughput.
Valero Energy’s (VLO) gross refining margin also fell by $0.4 per barrel YoY to $10.0 per barrel in the third quarter. The fall was due to a decline in oil spreads. The Brent–Maya, Brent–Alaskan North Sweet, and Brent–Argus Sour Crude Index spreads fell YoY in the quarter.
Valero Energy beat the estimate by about 10%. To learn more, read Valero’s Q3 Earnings Crush Wall Street’s Estimates.
Analysts expect Marathon Petroleum (MPC) and Delek US Holdings’ (DK) EPS to fall 13% and 66%, respectively. They expect PBF Energy’s (PBF) EPS to fall 44% YoY in the quarter. Also, analysts expect Holly Frontier’s (HFC) EPS to fall 28% YoY in the third quarter.