Phillips 66 PSX has witnessed upward earnings estimate revisions for 2022 and 2023 in the past seven days. The Zacks Consensus Estimate for its 2022 earnings per share suggests a year-over-year improvement of roughly 186%.
What's Favoring the Stock?
PSX has a diversified business model, having a significant presence in businesses related to refining midstream, chemicals and marketing & specialties. In each of the operations, Phillips 66 has a sound footprint pertaining to safety, profitability, size and competitive strengths.
It is focusing more on businesses like midstream, renewables and chemicals. This is making Phillips 66’s business model more stable. The firm’s premier midstream operations comprise U.S. pipeline network, spread across 22,000 miles. Included in the midstream portfolio are 20 crude terminals and 39 product terminals.
The midstream business also includes more than 500,000 barrels per day of fractionation capacity and 150,000 barrels per day of processing capacity. Thus, with a robust midstream business portfolio, Phillips 66 will generate stable cashflows with lower exposure to energy business volatility.
On a positive note, Phillips 66’s net debt level has returned to the pre-pandemic mark. PSX’s financial strength is also reflected in its strong investment-grade credit ratings. PSX, carrying a Zacks Rank #2 (Buy), also has a disciplined capital allocation strategy.
Other Stocks to Consider
Other prospective players in the same space include Chesapeake Energy Corporation CHK, Enterprise Products Partners LP EPD and Exxon Mobil Corporation XOM. While Chesapeake Energy sports a Zacks Rank #1 (Strong Buy), Enterprise Products and ExxonMobil carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chesapeake Energy is a premium natural gas operator and is well-positioned to gain from the significant improvement in gas price in the past year. In the prolific gas-rich Marcellus shale play, CHK’s operation spreads across roughly 650,000 net acres, where an average of four to five rigs will be operating this year. Chesapeake Energy also has a strong presence in Haynesville and Eagle Ford shale play, making the production outlook bright. Overall, being a leading upstream energy player, CHK has a more than 15 years of inventory, signifying more than 2,200 gas locations.
Enterprise Products generates stable fee-based revenues from its extensive pipeline network across more than 50,000 miles, transporting natural gas, natural gas liquids (NGLs), crude oil petrochemicals and refined products.
The midstream infrastructure provider also has storage assets that can hold more than 260 million barrels of NGL, petrochemical, refined products and crude oil. These assets can also store 14 billion cubic feet of natural gas. Moreover, Enterprise Products has $5.5 billion of major capital projects under construction that are likely to provide incremental fee-based revenues.
The positive trajectory in oil price is a boon for ExxonMobil’s upstream operations. This is because ExxonMobil has a pipeline of key projects in the Permian – the most prolific basin in the United States – and offshore Guyana.
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