With shares of Phillips 66 (NYSE:PSX) trading at around $61.93, is PSX an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Phillips 66 is an independent downstream energy company that also has chemical and midstream assets with higher returns, making it diversified. Phillips 66 operates in the United States, Europe and Asia. It has 15 refineries, with a net crude oil capacity of 2.2 million barrels per day. Through DCP Midstream, it has 7.2 billion cubic feet per day of gross natural gas processing capacity.
Refining is by far the biggest segment of the business. What separates Phillips 66 from many other refining companies is that it will not stick with underperforming assets. Some companies become too attached to their assets, even if those assets are consistent disappointments. This often leads to a drag on earnings. Phillips 66 is heartless in this regard, which is what you want to see as an investor.
Phillips 66 recently signed a 5-year contract with Global Partners LP (NYSE:GLP), which will improve transportation infrastructure. The following quote sums up the deal, “Global has established a ‘virtual pipeline’ for the reliable transportation of Bakken crude,” said Tim Taylor, Executive Vice President, Commercial, Marketing, Transportation & Business Development of Phillips 66. “Our five-year agreement with Global assures us long-term access to advantaged crude for our Bayway refinery through what we believe is a cost competitive origin-to-destination supply system to the East Coast.”
One of the most bullish signals coming from Phillips 66 is a recent dividend hike of 25 percent. But it’s important that we take a look at all the numbers before an opinion is formed on the stock.