Bank of America Securities analyst Doug Leggate maintained a Hold rating on Phillips 66 (PSX – Research Report) yesterday and set a price target of $150.00.
Geoff Meacham has given his Hold rating due to a combination of factors surrounding Phillips 66’s performance and future prospects. The company’s adjusted earnings per share (EPS) of $3.09 outpaced expectations, demonstrating robust cost savings, with 85% of the targeted reductions already realized ahead of the 2024 goal. Phillips 66’s solid operational reliability, particularly in its refining segment, contributed to this positive outcome, with discounted Canadian crude bolstering margins in both the Mid Continent and Gulf Coast regions. Strong cash flow and aggressive share buybacks further underscored this performance, showcasing the company’s financial health and commitment to shareholder returns.
However, despite these strengths, there are areas of concern that warrant a cautious approach. The West Coast margins showed weakness, particularly due to downtime in secondary units, which may present challenges until the renewable diesel conversion is completed. Additionally, while the midstream segment delivered record earnings, and the majority of cost savings have been achieved earlier than expected, the company is still in an execution phase with management signaling potential for further improvements. Leggate’s Hold rating reflects a balanced view, acknowledging Phillips 66’s strong execution and progress while also considering the pressures to maintain this momentum through 2024 and beyond. The expectation is for Phillips 66 to benefit from a favorable margin environment in the coming summer, but it’s clear that the Hold rating is a nod to the company needing to continue delivering on its strategic initiatives to justify a more bullish stance.
PSX’s price has also changed moderately for the past six months – from $111.550 to $144.310, which is a 29.37% increase.
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Phillips 66 (PSX) Company Description:
Founded in 2012, Phillips 66 is a Texas-based multinational energy company, which is engaged in the processing, transportation, storage, and marketing of fuels and other related products. The company operates through the following segments: Midstream, Chemicals, Refining and Marketing & Specialties.
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