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Phillips 66 Q3 Earnings: Is NYSE:PSXP Cheap at 7.1x Forward P/E?

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Phillips 66 Partners LP (NYSE:PSXP) is scheduled to report Q3 earnings results on October 30, 2020.

The company is expected to report earnings of $0.86/share on revenue of $385.4 million. The consensus earnings per share (EPS) of $0.86/share is based on a poll of 8 analysts and represents a decline in eps of −25.1% over the same quarter last year, when the company reported earnings of $1.15/share.

The revenue forecast of $385.4 million based on a poll of 7 analysts implies a year-over-year (YoY) decline in revenue of −6.2%. Last year the company reported $411 million in revenue for the quarter.

Expected to report EPS contraction of −25.1% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $385.43 $411.00 −6.2%
EPS $0.86 $1.15 −25.1%

Earnings Call Trends

Historically, management has exceeded analyst expectations 6 out of the last 8 tracked quarters, and missed expectations 2 quarters.

What are your expectations from Phillips 66 Partners LP for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.77 $1.05 36.6% Beat
Q1, 2020 $0.93 $0.93 −0.5% Missed
Q4, 2019 $0.97 $1.06 8.7% Beat
Q3, 2019 $1.10 $1.15 4.9% Beat
Q2, 2019 $1.12 $1.15 2.8% Beat
Q1, 2019 $1.02 $0.92 −9.6% Missed
Q4, 2018 $0.96 $1.09 13.9% Beat
Q3, 2018 $0.89 $1.10 23.5% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −1.5%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 31, 2020 $28.21 $27.80 −1.5% Decline
May 1, 2020 $42.55 $41.56 −2.3% Decline
January 31, 2020 $58.90 $58.43 −0.8% Decline
October 25, 2019 $55.17 $57.01 3.3% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.45, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.45 implies a 0.7% chance of earnings manipulation.

Fundamentals And Technical Analysis

Phillips 66 Partners LP is currently trading at $25.52/share, down −3.0% for the day. The company is trading at approximately 39.1% of its 52-week high of $65.22/share. The company’s stock price is down −8.2% since the last earnings report and up 4.1% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 53.21 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:PSXP Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 6.23 and a forward P/E multiple of 7.12.

Phillips 66 Partners LP’s current share price also implies a price-to-book (P/B) multiple of 2.70. The following table summarizes some other key fundamental ratios:

Data as of October 27, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $25.52
P/E Ratio 6.2x
P/E Ratio (Fwd) 7.1x
PEG Ratio −2.9
Total Debt / Total Capital 34.4%
Levered Free Cash Flow $87 million
EV / EBITDA 11.9x

Finbox

Phillips 66 Partners LP is a mid-cap stock with a market capitalization of $5.827 billion and a total enterprise value of $10.578 billion. The company operates in the Energy sector and the Oil, Gas & Consumable Fuels industry.

Phillips 66 Partners LP owns, operates, develops, and acquires midstream assets. It offers transportation, terminaling, processing, and storage and fractionation of refined petroleum products and natural gas liquids. The company was founded in 2013 and is headquartered in Houston, Texas. Phillips 66 Partners LP operates as a subsidiary of Phillips 66.

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