On Tuesday, Phillips 66 (NYSE:PSX) saw its stock price target lowered by Piper Sandler from $187.00 to $170.00, while the firm maintained an Overweight rating on the stock. This adjustment follows a significant narrowing of the differential (diff), which has affected second-quarter capture rates for refineries that process Western Canadian Select (WCS) crude oil.
The reduced diff, which now stands at $12 per barrel, represents a 10% decrease since the beginning of the second quarter. This change is expected to negatively influence the financial performance of West Coast and Mid-Continent refineries, including Phillips 66, in their upcoming quarterly results.
Piper Sandler's revised price target for Phillips 66 is based on a sum-of-the-parts (SOTP) valuation framework for the fiscal years 2024 and 2025. The analysis assumes a blended forward-looking EV/EBITDA multiple of 5.5x for refining, 8.0x for CP Chem and marketing, and 9.0x for logistics, excluding master limited partnerships (MLPs). The firm also factored in a 5.8x multiple for corporate overhead expenses.
The valuation incorporates the current market prices of holdings in MLPs, specifically DCP Midstream, LP. Moreover, it includes a risk-adjusted valuation for the Rodeo Renewable Diesel (RD) plant, which is based on a 10x EV/EBITDA multiple for the years 2024 and 2025. The new price target reflects the anticipated impact of these various factors on Phillips 66's financial outlook.
InvestingPro Insights
Phillips 66's (NYSE:PSX) recent market performance and financial metrics provide a nuanced picture for investors. The company's current market capitalization stands at $61.51 billion, reflecting its significant presence in the energy sector.
With a P/E ratio of 11.09, which adjusts to 10.43 for the last twelve months as of Q1 2024, Phillips 66 trades at a valuation that may be attractive to value-oriented investors. The PEG ratio during the same period is -0.21, suggesting that the market may not be factoring in future growth potential, and the Price/Book ratio of 2.07 indicates that the company's stock is trading at just over twice its book value.
Despite a revenue decline of 11.53% in the last twelve months as of Q1 2024, Phillips 66 showed a quarterly revenue growth of 4.11% in Q1 2024. This demonstrates some resilience in generating income amidst challenging market conditions. Moreover, the company's dividend yield as of the 135th day of 2024 is 3.17%, backed by a solid dividend growth of 9.52% in the last twelve months as of Q1 2024, which may appeal to income-seeking investors.
InvestingPro Tips suggest that investors should monitor the company's next earnings date on July 26, 2024, for further insights into its operational performance and financial health. Additionally, there are PRONEWS24 more InvestingPro Tips available, providing deeper analysis and strategic perspectives that can be accessed with an additional 10% off a yearly or biyearly Pro and Pro+ subscription using the coupon code PRONEWS24.
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