Underscoring the upgrade and bullish outlook were "favorable" fundamentals, including a wide crude differential, low natural gas prices, and growing refined product exports, according to analysts.
Financial flexibility has improved with declining stay-in-business spending and rising growth investments in crude flexibility, which allows refiners to reduce debt, grow the dividend and repurchase their own shares, they added.
Phillips 66 is a Houston-based multinational energy company.
TheStreet Ratings team rates PHILLIPS 66 as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate PHILLIPS 66 (PSX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, notable return on equity and impressive record of earnings per share growth. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.13, which illustrates the ability to avoid short-term cash problems.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, PHILLIPS 66 has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- PHILLIPS 66 has improved earnings per share by 21.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, PHILLIPS 66 increased its bottom line by earning $7.12 versus $5.91 in the prior year. For the next year, the market is expecting a contraction of 6.4% in earnings ($6.67 versus $7.12).
- PSX, with its decline in revenue, slightly underperformed the industry average of 38.5%. Since the same quarter one year prior, revenues fell by 47.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: PSX Ratings Report