Phillips 66 Earnings Beat Reflects ‘Strong Market Environment’
2022.07.29 20:02
Phillips 66 (PSX) Earnings Beat Reflects ‘Strong Market Environment’
By Sam Boughedda
Despite an earlier dip, Phillips 66 (NYSE:PSX) shares are trading 1% higher Friday following its second-quarter earnings report.
The company beat earnings estimates, posting earnings per share of $6.77, $1.02 better than the analyst estimate of $5.75. In addition, cash flow from operations came in at $3.6 billion, and free cash flow was $3.2 billion.
The company said it is continuing its business transformation to enable sustainable cost reductions of at least $700 million annually across the enterprise.
During the second quarter, Phillips 66 paid down $1.5 billion of debt.
“Our earnings reflect the strong market environment during the second quarter driven by a tight global product supply and demand balance,” said Mark Lashier, President and CEO of Phillips 66. “We are focused on reliably providing critical energy products, including transportation fuels, to meet peak summer demand.”
A Goldman Sachs analyst maintained a Conviction Buy rating and a $109 price target on the stock following the report.
“Phillips 66 (PSX, Buy, on CL) reported adjusted 2Q2022 EPS of $6.77. That said, after adjusting out an unrealized investment loss from the company’s ownership in NOVONIX, we come to adjusted EPS of $7.15 versus GS/FactSet consensus at $6.03/$5.85, respectively. On our numbers, the EPS delta was driven mainly by strong results at Marketing and Refining,” he wrote.
A Mizuho analyst maintained a Buy rating and $115 price target on Philips 66 shares, telling investors they “believe refining results will remain strong in 3Q, given the limited product supply increases and domestic product demand within the historical ranges.”
“Current US refinery utilization at 90+% continues to limit the potential for meaningful supply increases in the short-term. Above mid-cycle crack spreads should continue to lead to good financial results and cash return,” said the analyst. “Cash flow from operations of $3.6 billion and free cash flow of $3.2 billion (both excluding working capital change) were very strong and support a more aggressive cash return pace into 3Q (dividend increased in 2Q, we see potential acceleration of share repurchases in the current quarter).”
Finally, a BMO Capital Markets analyst said they “view Phillips 66 2Q22 earnings as positive with EPS above consensus estimates and outperformance broad based across refining, midstream, and marketing & specialties.”
The analyst, who has an Outperform rating and $130 price target on Phillips 66 shares, added: “Cash flow before working capital was also strong, while WC should reverse in 2H. Phillips repaid $1.5Bn of debt, and we’ll look for color around the pace of 2H buybacks on the call ($0.1Bn in 2Q).”
