Phillips 66 (PSX) Gears Up for Q3 Earnings: What's in Store?

Zacks Equity Research
·4-min read

Phillips 66 PSX is set to report third-quarter 2020 results on Oct 30, before the opening bell.

In the last reported quarter, the company came up with adjusted loss per share of 74 cents, narrower than the Zacks Consensus Estimate of a loss of 99 cents on the back of lower operating costs and expenses. It surpassed the Zacks Consensus Estimate in each of the last four quarters, with the average being 26.9%, as shown in the chart below.

Phillips 66 Price and EPS Surprise

Phillips 66 Price and EPS Surprise
Phillips 66 Price and EPS Surprise

Phillips 66 price-eps-surprise | Phillips 66 Quote

Let’s see how things have shaped up prior to the announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for third-quarter loss of 66 cents per share has seen no upward movement but seven downward revisions in the past 30 days. The figure suggests a year-over-year decrease of 121.2%.

Further, the Zacks Consensus Estimate for revenues is pegged at $17.8 billion for the quarter, indicating a decline of 36% from the year-ago reported figure.

Factors to Note

Although midstream infrastructure has long-term contracts with stable fee-based revenues, volatile market conditions in the third quarter might have affected shipping volumes. Moreover, Phillips 66’s refining and chemicals units might have faced the brunt of energy demand destruction caused by the coronavirus pandemic.

Given the market conditions in the third quarter, the Zacks Consensus Estimate for adjusted pre-tax income from the Midstream segment is pegged at $325 million, indicating a decrease from the third-quarter 2019 level of $440 million. Moreover, the Zacks Consensus Estimate for third-quarter adjusted pre-tax loss from the Refining segment is pegged at $861 million. A profit of $839 million was recorded in the September quarter of 2019. As this segment is the largest contributor to profits (40% in 2019), lower income from the same might reflect on its overall third-quarter results.

For the Marketing and Specialties segment, the consensus mark is pegged at a profit of $326 million, suggesting a decrease from $498 million in the September quarter of 2019. The same for the Chemicals segment’s profit is pegged at $136 million, indicating fall from the year-ago level of $269 million. Decreased profit levels from all the company’s business segments are expected to result in a 121.2% year-over-year decline in earnings per share.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Phillips 66 this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here as you will see below.

Earnings ESP: The company’s Earnings ESP is -20.31% as the Most Accurate Estimate is currently pegged at a loss of 80 cents per share, much wider than the Zacks Consensus Estimate of a loss of 66 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Phillips 66 currently carries a Zacks Rank #4 (Sell).

Energy Stocks With Favorable Combination

Here are some companies from the Energy space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

EOG Resources, Inc. EOG has an Earnings ESP of +29.17% and is a Zacks #3 Ranked player. The company is scheduled to release third-quarter results on Nov 5. You can see the complete list of today’s Zacks #1 Rank stocks here.

DCP Midstream, LP DCP has an Earnings ESP of +4.77% and a Zacks Rank of 1. It is scheduled to report third-quarter results on Nov 4.

Sunoco LP SUN has an Earnings ESP of +8.68% and holds a Zacks Rank #1. It is set to report third-quarter results on Nov 4.

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