Phillips 66 (PSX) posted adjusted third-quarter 2014 earnings of $2.02 per share, beating the Zacks Consensus Estimate of $1.69. The bottom line was also considerably higher than the year-ago earnings of 85 cents per share. Substantial improvement in the company’s refining segment and higher marketing margins led to the outperformance.
Segment Results
Midstream
The segment generated adjusted quarterly earnings of $115 million compared with $147 million in the year-ago comparable quarter.
Chemicals
The segment generated adjusted earnings of $299 million compared with $262 million in the year-ago quarter.
Refining
The segment generated adjusted earnings of $558 million compared with a loss of $30 million in the prior-year quarter. Substantial improvement in refining margins drove the impressive results. During the quarter, the company’s refining utilization was 94% and clean product yield was 84%.
Marketing and Specialties (M&S)
Segmental earnings were $259 million, up from $255 million in the prior-year comparable quarter. Reduced production costs led to higher global margins which aided the results.
Financial Condition
In the reported quarter, Phillips 66 generated $429 million of cash from operations. It also returned $771 million of capital to shareholders. Out of this, $277 million was disbursed as dividends while $494 million was used to repurchase 6 million shares of the common stock.
As of Sep 30, 2014, cash and cash equivalents of the company totaled $3.1 billion while debt was $6.2 billion. Debt-to-capitalization ratio was 22% and return on capital employed was 18%.
Strategic Update
Phillips 66 announced that it has entered into two joint venture agreements with Energy Transfer Equity, L.P. (ETE) and Energy Transfer Partners, L.P. (ETP), to develop the Dakota Access Pipeline (DAPL) and Energy Transfer Crude Oil Pipeline (ETCOP) projects. The company, with 25% stake in the projects, will bear $1.2 billion in costs. These pipelines are expected to commence operations in the final quarter of 2016.
Zacks Rank
Phillips 66 currently carries a Zacks Rank #3 (Hold). Meanwhile, investors interested in oil refiners could consider better-ranked stocks like Murphy USA Inc. (MUSA). The company sports a Zacks Rank #1 (Strong Buy).
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