Phillips 66 (PSX – Free Report) reported better-than-expected fourth-quarter 2024 results, with both the bottom line and top line beating the Zacks Consensus Estimate. The stock price has increased 3.1% since its earnings release on Jan. 31.
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Before delving into the quarterly results, let’s understand the premium refining company’s business.
PSX’s Refining Business
Phillips 66 boasts one of the world’s largest and most sophisticated refining operations, with 12 strategically located refineries across the United States and Europe. These state-of-the-art facilities represent a powerhouse of efficiency and competitiveness in the industry. However, despite its robust infrastructure and operational excellence, PSX incurred an adjusted refining loss of $759 million for the quarter.
Better-Than-Expected Q4 Results of PSX
The refining player, carrying a Zacks Rank #5 (Strong Sell), reported a fourth-quarter adjusted loss of 15 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 20 cents. The bottom line was, however, lower than the year-ago quarter’s profit of $3.09. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Revenues decreased to $33.99 billion from $38.74 billion in the prior-year quarter. The top line, however, beat the Zacks Consensus Estimate of $32.03 billion.
PSX’s Operational Performance
The segment reported an adjusted pre-tax loss of $759 million against adjusted pre-tax earnings of $842 million in the year-ago quarter. The reported figure also missed our projection of earnings of $26.7 million. The decline was largely due to a contraction in realized margins, stemming from weaker market crack spreads and the impact of accelerated depreciation linked to the shutdown of its Los Angeles Refinery.
Refining’s realized refining margins worldwide declined to $6.08 per barrel from the year-ago quarter’s $13.88, and the same in the Central Corridor and Atlantic Basin/Europe dropped to $6.68 and $6.09 per barrel, respectively, from the year-ago quarter’s $21.72 and $9.11.
The West Coast’s margins declined to $5.74 per barrel from $11.03 in the year-ago quarter. In the Gulf Coast, the metric declined to $5.58 per barrel from $13.72 a year ago.
PSX’s Refining Business Outlook
Phillips 66 is targeting an adjusted controllable refining cost of $5.50 per barrel (excluding turnarounds) within two years, down from $5.90 per barrel in 2024. The Los Angeles Refinery shutdown in the fourth quarter of 2025 will contribute 50% of the cost reduction, as it has historically been one of the company’s higher-cost facilities. The remaining savings will come from business transformation initiatives, including efficiency gains, reliability improvements and process optimizations across the refining network.
Performance of Energy Giants
Exxon Mobil Corporation (XOM – Free Report) , Chevron Corporation (CVX – Free Report) and SLB (SLB – Free Report) are three energy giants that have also reported fourth-quarter earnings. While ExxonMobil & SLB beat the Zacks Consensus Estimate for earnings, Chevron missed the mark.
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