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Phillips 66 Posts Stellar 2018 Performance But Tricky Road Ahead

Feb. 10, 2019 1:31 PM ETPhillips 66 (PSX)30 Comments
Callum Turcan profile picture
Callum Turcan


  • Covering Phillips 66's financial performance last year, which saw impressive growth across each income generating division.
  • Midstream expansion is how management plans to grow Phillips 66 in ways that aren't dependent on crack spreads.
  • Overall, a great report.
  • Another big dividend increase is planned for 2019.

Phillips 66 (NYSE:NYSE:PSX) posted a solid earnings report for the final quarter of 2018 that rounded out what was a great year for the firm. Wall Street clearly liked the news and bid the shares up 2% by the end of the trading day on Friday. Note that Phillips 66 consolidates its performance with its core midstream spin-off Phillips 66 Partners LP (NYSE:PSXP). Phillips 66 is popular with many income-oriented investors because it yields 3.4% and has continuously raised its payout. Let’s dig in.

Phillips 66 And Phillips 66 Partners LPSource: Phillips 66

Financial overview

When viewing Phillips 66’s year-over-year performance, it is important to keep in mind the firm recorded a massive income tax benefit of $2.6 billion in the fourth quarter of 2017 (due to the tax cut/reform law getting passed and signed into law in the United States). On a net income basis, Phillips 66 saw its bottom line grow by 10% to $5.6 billion in 2018 versus 2017 levels.

However, on an operating income basis (note this metric excludes debt and interest expenses, which the firm lumps together with its operating expenses in its income statement), Phillips 66 posted 99% year-over-year growth as its operating income climbed to $7.9 billion. That growth is made even better when including debt and interest expenses, as Phillips 66’s profit before corporate income taxes grew by 109% year over year to $7.4 billion in 2018.

This is stellar growth and a clear sign that management’s plan to grow across the board (midstream, refining, petrochemical, and retail) is paying off nicely. A 9% reduction in Phillips 66’s diluted share count in 2018 versus 2017 helped the firm grow its diluted EPS from $9.85 in 2017 to $11.80 last year.

Phillips 66 experienced growth across all four of its income generating divisions while costs were down at the

This article was written by

Callum Turcan profile picture
Worked as an equity analyst for several years in the USA and have been writing financial articles and analyzing publicly traded companies for more than a decade.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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