Phillips 66 Stock To $92?

Phillips 66 (PSX) stock has fallen 6.9% during the past day, and is currently trading at $131.78. Our multi-factor assessment suggests that it may be time to sell PSX stock. We have, overall, a pessimistic view of the stock, and a price of $92 may not be out of reach. We believe there are several things to fear in PSX stock given its overall Very Weak operating performance and financial condition. In addition, keeping in mind its High valuation, we think that the stock is Very Unattractive.

Below is our assessment:

Ask yourself – Is holding PSX stock risky? Of course it is. High Quality Portfolio mitigates that risk.

Let’s get into details of each of the assessed factors but before that, for quick background: With $53 Bil in market cap, Phillips 66 provides transportation of crude oil, production of chemicals like ethylene, refining of petroleum into fuels, and marketing of refined products across multiple energy segments.

[1] Valuation Looks High

This table highlights how PSX is valued vs broader market. For more details see: PSX Valuation Ratios

[2] Growth Is Very Weak

• Phillips 66 has seen its top line shrink at an average rate of -6.6% over the last 3 years
• Its revenues have fallen -11% from $148 Bil to $132 Bil in the last 12 months
• Also, its quarterly revenues declined -2.9% to $35 Bil in the most recent quarter from $36 Bil a year ago.

This table highlights how PSX is growing vs broader market. For more details see: PSX Revenue Comparison

[3] Profitability Appears Very Weak

• PSX last 12 month operating income was $1.7 Bil representing operating margin of 1.3%
• With cash flow margin of 2.6%, it generated nearly $3.4 Bil in operating cash flow over this period
• For the same period, PSX generated nearly $1.5 Bil in net income, suggesting net margin of about 1.1%

This table highlights how PSX profitability vs broader market. For more details see: PSX Operating Income Comparison

[4] Financial Stability Looks Moderate

• PSX Debt was $22 Bil at the end of the most recent quarter, while its current Market Cap is $53 Bil. This implies Debt-to-Equity Ratio of 39.5%
• PSX Cash (including cash equivalents) makes up $1.8 Bil of $76 Bil in total Assets. This yields a Cash-to-Assets Ratio of 2.4%

[5] Downturn Resilience Is Weak

PSX has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• PSX stock fell 32.7% from a high of $110.25 on 8 June 2022 to $74.16 on 26 September 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 11 November 2022
• Since then, the stock increased to a high of $172.71 on 3 April 2024 , and currently trades at $131.78

 
2020 Covid Pandemic

• PSX stock fell 62.5% from a high of $112.20 on 2 January 2020 to $42.09 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 22 November 2022

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read PSX Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.