Phillips 66 (PSX) posted adjusted first-quarter 2014 earnings of $1.47 per share, beating the Zacks Consensus Estimate of $1.34 by 9.7%. The beat came from higher profits in midstream and chemicals businesses.
The quarterly earnings compare unfavorably with $2.19 per share earned a year ago. The decline was mainly due to lower refining margins in all regions.
Segment Results
Midstream
The segment generated adjusted quarterly earnings of $188 million compared with $110 million in the comparable quarter last year. The increase was backed by improved margins resulting from higher throughput fees as well as lower operating costs.
Chemicals
The segment generated adjusted earnings of $316 million compared with $282 million in the comparable quarter last year. Higher realized Olefins and Polyolefins chain margins, benzene margins and equity earnings led to the increase. This was partially offset by lower ethylene volumes.
Refining
The segment generated adjusted earnings of $306 million compared with $922 million in the year-ago quarter. The dismal results can be traced back to lower realized refining margins, owing to decline in the average worldwide market crack spread. During the quarter, Phillips 66’s refining utilization was at 90% and clean product yield was 84%.
Marketing and Specialties (M&S)
Segmental earnings were $137 million, down from $188 million from the comparable quarter last year. The decrease stemmed from lower exports due to the refinery turnaround activity in the Gulf Coast region during the first quarter as well as higher costs and lower volumes.
Financial Condition
In the reported quarter, Phillips 66 generated $1.4 billion of cash from operations. It also returned $2.2 billion of capital to shareholders. Of this, $229 million was disbursed as dividends while $640 million was used to repurchase 8.4 million shares of common stock.
As of Mar 31, 2014, cash and cash equivalents were $5.3 billion alongside $6.2 billion of debt. The company’s debt-to-capitalization ratio was 22% and return on capital employed was 23%.
Zacks Rank
The stock has a Zacks Rank #3 (Hold). Investors interested in oil refiners business segment can also consider stocks like Unit Corp (UNT), Helmerich & Payne, Inc. (HP) and Boardwalk Pipeline Partners, LP (BWP). All these sport a Zacks Rank #1 (Strong Buy).
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