Phillips 66 Earnings Improving Slowly

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When oil refiner Phillips 66 (NYSE: PSX) reported third-quarter 2016 earnings before markets opened Friday, it reported adjusted diluted earnings per share (EPS) of $1.05, compared with EPS a year ago of $3.02. Quarterly revenues totaled $22.04 billion, compared with revenues of $26.42 billion in the third quarter of 2015. The consensus estimates called for EPS of $0.88 on revenues of $24.57 billion.

On a GAAP basis, Phillips 66 posted quarterly EPS of $0.96 on consolidated earnings of $511 million. Adjusted earnings totaled $556 million, compared with $1.65 billion in the year ago quarter. Total adjusted net income from refining totaled $134 million, compared with $1.05 billion in the third quarter of 2015.

In its earnings press release, Phillips 66 compares third-quarter performance with its second-quarter results. Clearly results are improving. Compared with the third quarter of 2015, however, the company is clearing staggering under low prices for refined products.

Sequentially, adjusted net income rose from $499 million in the second quarter and $360 million in the first quarter. Net income from refining slipped sequentially, from $152 million in the second quarter. The company attributed lower sequential adjusted earnings to higher planned turnaround expenses, partially offset by lower routine maintenance costs.

The company did not offer guidance in its earnings release, but consensus estimates call for fourth-quarter EPS of $0.80 on revenues of $24.39 billion. For 2016, EPS is forecast at $3.32 on revenues of $88.59 billion.

Phillips 66 did say that it has reduced its capital spending estimate from a prior total of $3.9 billion for 2016 to $3.0 billion. The reduction primarily reflects midstream project cancellations and deferrals, as well as the impact of project financing.

CEO and Chairman Greg Garland said:

Our earnings during the third quarter reflect the benefit of our diversified portfolio. We generated $1.2 billion in cash from operations and a Phillips 66 Partners equity offering. This year we are delivering record operational excellence results, managing costs, executing our major projects and maintaining disciplined capital allocation.

Year over year, worldwide refining margin per barrel dropped from $13.96 to $7.23

Shares of Phillips 66 closed down about 1.3% on Thursday to $79.99, and they traded up about 0.2% in Friday’s premarket session at $80.17. The stock’s 52-week trading range is $71.74 to $94.12. The 12-month target price for the shares was around $84.80 before this latest report.