Phillips 66 Partners (PSXP) Stock Declines Today Following 2015 Capital Budget Expansion

NEW YORK (TheStreet) -- Phillips 66 Partners (PSX) shares closed trading down 2.29% to $62.63 on Friday after the oil and gas company announced a 2015 capital budget of $4.6 billion.

The company said that the investments are designed to support midstream business growth. Including capital spending on joint ventures with DCP Midstream  (DPM) and Chevron Phillips Chemical Company, the company's total capital program is expected to be $6.8 billion.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Investors may have reacted negatively to the company spending more than double what it spent on midstream investments from last year's budget at a time when five year low oil prices could hurt company profits. Data released today suggested that global oil and gas exploration projects totaling up to $150 billion could be put on hold next year due to falling oil prices, according to Reuters.

"The 2015 capital program reflects our commitment to grow our higher-value businesses while enhancing returns in Refining. We are executing a portfolio of major Midstream and Chemicals projects while evaluating a significant backlog of investment opportunities," said CEO Greg Garland.

TheStreet Ratings team rates PHILLIPS 66 PARTNERS LP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate PHILLIPS 66 PARTNERS LP (PSXP) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its notable return on equity, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PHILLIPS 66 PARTNERS LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The revenue growth came in higher than the industry average of 6.4%. Since the same quarter one year prior, revenues slightly increased by 6.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.92, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 4.28, which clearly demonstrates the ability to cover short-term cash needs.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 103.12% over the past year, a rise that has exceeded that of the S&P 500 Index. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • PHILLIPS 66 PARTNERS LP's earnings per share improvement from the most recent quarter was slightly positive. This year, the market expects an improvement in earnings ($1.44 versus $0.97).
  • You can view the full analysis from the report here: PSXP Ratings Report
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

More from Markets

Dow Skids and Stocks Fall Hard as Earnings Disappoint, Caterpillar Tumbles

Dow Skids and Stocks Fall Hard as Earnings Disappoint, Caterpillar Tumbles

Caterpillar Bulldozes Industrial Sector With Bad News on Earnings Call

Caterpillar Bulldozes Industrial Sector With Bad News on Earnings Call

Jim Cramer: If You're Afraid of the 10-Year Yield, Go to Cash

Jim Cramer: If You're Afraid of the 10-Year Yield, Go to Cash

Eli Lilly CEO Expresses Confidence in New Rheumatoid Arthritis Drug

Eli Lilly CEO Expresses Confidence in New Rheumatoid Arthritis Drug

Video: Jim Cramer on Rising Interest Rates, Trade Worries & Caterpillar

Video: Jim Cramer on Rising Interest Rates, Trade Worries & Caterpillar