On Friday, Mizuho Securities adjusted its outlook on Phillips 66 (NYSE:PSX), a diversified energy manufacturing and logistics company. The firm reduced its price target on the stock to $162 from the previous $167 while maintaining a Neutral rating.
The adjustment reflects an anticipated sequential decline in refining earnings for the company, attributed to lower volumes and the lack of certain margin benefits that were present in the fourth quarter of 2023. These benefits included trading results, Western Canadian Select (WCS) transportation differentials, and product pricing on the Colonial pipeline, among others.
The firm's analysis suggests that Phillips 66 operated at approximately 90% utilization, which is slightly below the company's own guidance of low-90% and the 92% reported in the previous quarter. This was due in part to unplanned outages.
Further contributing to the expected decrease in earnings are projections for the Marketing & Specialties segment, where lower margins are anticipated, and the Midstream segment, which may see reduced earnings due to lower volumes and weather-related impacts.
However, the Chemicals segment of Phillips 66 is expected to show an increase in earnings sequentially. This is attributed to higher full chain margins and the recent expansion of capacity. Despite these mixed segment performances, Mizuho's overall estimate for Phillips 66's EBITDA and EPS stands at $2,115 million and $2.43 respectively. This is in contrast to the consensus estimates, which are slightly higher at $2,143 million for EBITDA and $2.41 for EPS.
The revised price target of $162 per share is based on Mizuho's net asset value (NAV) estimation for Phillips 66. The new target reflects a modest reduction from the prior target of $167, as the firm recalibrates its expectations in light of the company's projected earnings and operational challenges.
InvestingPro Insights
Phillips 66 (NYSE:PSX) presents a mixed financial landscape according to recent InvestingPro data. With a market capitalization of $70.26 billion, the company stands as a significant player in the energy sector. Investors are looking at a P/E ratio of 10.61, which has slightly adjusted to 10.04 when considering the last twelve months as of Q4 2023. This could indicate that the stock is reasonably valued in the current market, especially when compared to historical earnings.
While revenue has seen a downturn of -13.29% over the last twelve months as of Q4 2023, the company has maintained a healthy gross profit margin of 13.1%. This suggests that despite the drop in revenue, Phillips 66 has managed to control its cost of goods sold effectively. Additionally, the company’s dividend yield stands at 2.73%, which could be attractive to income-focused investors, especially considering the significant dividend growth of 18.56% in the same period.
InvestingPro Tips highlight the importance of considering the company's recent price performance, which includes a 1-year price total return of 64.89%, reflecting strong investor confidence. Moreover, with an upcoming earnings date on April 26, 2024, investors should closely monitor the company's performance updates. For those interested in deeper analysis, there are more InvestingPro Tips available, which can be accessed with a special offer: use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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