Phillips 66 Q3 preview: Can record refining results keep PSX's rally alive?

What happened

Phillips 66 will report third-quarter earnings before the market opens on Wednesday, October 28. Analysts expect earnings per share of $11.79, up 367.9% from a year earlier, and revenue of $43.23 billion. Mizuho downgraded Phillips 66, Delek US, and Par Pacific to Neutral.

Confirmed

Global impact / market context

Analyst profit and revenue estimates set a high bar for Phillips 66, so even solid refining results may not lift the stock further after its large run-up. A downgrade to Neutral, which means the broker sees limited upside, can prompt investors to take profits.

Analyst inference

Refining stocks have risen with high crack spreads, which means the gap between crude oil costs and refined product selling prices. Middle East and Russia-Ukraine conflicts have constrained refined product supply and delayed a return to mid-cycle margins, but analysts see limited further upside.

Analyst inference

What to watch

1. Watch whether Phillips 66 reports earnings per share of $11.79 and revenue of $43.23 billion, matching analyst expectations. A miss on either figure could pressure shares after the strong year-to-date performance. Confirmed
2. Watch for management guidance on refining utilization, margin capture, and costs, which means how fully plants run and how much profit is kept per sale, since Mizuho says the stock price already reflects much improvement. Proposed
3. Watch whether crack spreads, the gap between crude costs and refined product prices, stay elevated due to supply constraints from Middle East and Russia-Ukraine conflicts, or ease toward mid-cycle levels and reduce refiner earnings. Analyst inference

Evidence

• seekingalpha.com