Barron's: Phillips 66 isn't getting enough credit for fast-growing chemicals unit

Phillips 66 (PSX) has more than doubled since its May 2012 spinout from ConocoPhillips, but Barron's Dimitra Defotis suspects the stock has more upside ahead.

She thinks the market doesn't fully recognize the value of PSX's chemicals business, and that both chemicals and the midstream transportation business are likely to grow because of cheap natural gas and gas liquids, supporting margins and cash flow.

Even though non-refining businesses account for 40% of profits, PSX is typically lumped in with other pure-play refiners; independent U.S. refiners are trading at ~10x estimated 2014 earnings, while chemical companies command a much higher multiple.

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Comments (6)
  • name999
    , contributor
    Comments (199) | Send Message
    Finally someone called this out. The chemical and midstream segments of PSX are like gold miners and should be given more notice. PSX is like a company that combines traditional refining business (e.g. VLO) and very competitive chemical business (e.g. DOW). It will shine even brighter soon as the price of the natural gas stays low.
    14 Feb 2014, 05:25 PM Reply Like
  • Michael Fitzsimmons
    , contributor
    Comments (11849) | Send Message
    Well, Barron's is a bit late on this one. Phillips66 is likely the best investment one could make in "Shale USA" and I have been saying so for quite some time:



    CPChem is arguably the best chemical company in the world, and PSX is going to grow it.
    14 Feb 2014, 07:45 PM Reply Like
  • Continental Kid
    , contributor
    Comments (239) | Send Message
    Yes have been on this one...Great call..!!....I jumped on board at 55 and got mom on board at 60......this is the most share holder friendly stock I have ever seen..!!....and the future is so bright...may have to buy a little more but...might wait til it comes back to 69 or that may not happen....
    Best of luck to all..
    14 Feb 2014, 09:39 PM Reply Like
  • chopchop0
    , contributor
    Comments (5345) | Send Message
    agreed. they are late to the refiner+more story of PSX. It's why I own plenty of PSX and none of VLO.
    14 Feb 2014, 09:57 PM Reply Like
  • King Rat
    , contributor
    Comments (1902) | Send Message
    The stock is on a tear and given early investors a 2-bagger. They say "there is plenty of upside left" which is what pros often say when they want to get out. I am not saying the stock is going to fall, but it looks like some smart money wants to take profits.


    The company may be great, and the dividend is good, stock buy back is good, profits are good, but if some professional investors are starting to look for the next opportunity, I would find it difficult to figure this $45billion company priced 2x book will easily double to $90billion very soon. If that's the case and somebody has fresh powder, they should look to see where the pros taking their profits are reinvesting them.


    As a long term buy and hold, however, I kind of like PSX in the way I like EMR or CALM. It looks like a solid company with solid management operating in a stable industry.
    14 Feb 2014, 11:11 PM Reply Like
  • User 3950401
    , contributor
    Comments (556) | Send Message
    King Rat - very good quick analysis...I agree, at 2x book value, its very hard to see it going to 4x book value ($90 billion dollar company) the same time, it is a solid going concern.
    17 Feb 2014, 01:13 PM Reply Like
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