Long-established in the Oil & Gas industry, Phillips 66 (PSX, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.79%, juxtaposed with a three-month change of 27.13%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Phillips 66.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 7/10
- Profitability rank: 7/10
- Growth rank: 4/10
- GF Value rank: 1/10
- Momentum rank: 6/10
Based on the above method, GuruFocus assigned Phillips 66 the GF Score of 68 out of 100, which signals poor future outperformance potential.
Understanding Phillips 66's Business
Phillips 66 is an independent refiner with 12 refineries that have a total crude throughput capacity of 1.8 million barrels per day, or mmb/d. In 2023, the Rodeo, California, facility ceased operations and be converted to produce renewable diesel. The midstream segment comprises extensive transportation and NGL processing assets and includes DCP Midstream, which holds 600 mbd of NGL fractionation and 22,000 miles of pipeline. Its CPChem chemical joint venture operates facilities in the United States and the Middle East and primarily produces olefins and polyolefins. With a market cap of $71.95 billion and sales of $147.4 billion, Phillips 66 operates with an operating margin of 5.39%, reflecting its efficiency in managing operations relative to its revenue.
Growth Prospects
A lack of significant growth is another area where Phillips 66 seems to falter, as evidenced by the company's low Growth rank. The oil and gas industry is highly cyclical and capital-intensive, which can lead to volatile earnings and uncertain growth trajectories. Phillips 66's efforts to pivot towards renewable energy sources, such as the conversion of its Rodeo facility, may offer long-term benefits but also come with short-term growth challenges. The company's strategic decisions in response to evolving energy markets will be critical in determining its future growth potential.
Lastly, Phillips 66's predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Next Steps
Considering Phillips 66's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While the company has a solid financial foundation and profitability, its low growth and GF Value ranks raise concerns about its ability to outperform in the future. Investors should closely monitor Phillips 66's strategic initiatives and industry trends to assess whether the company can overcome these challenges and capitalize on new opportunities.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
