VLO

Phillips 66 Hikes Dividend 25%!

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Dividend Growth Newsletter portfolio holding Phillips 66 (click ticker for report: ) announced on Tuesday that it would raise its quarterly dividend 25% to $0.39 per share. This equates to an annual dividend of $1.56 per share, and an annual yield of 2.6% at current levels. We applaud the move, though we aren’t surprised, as we have long believed that the firm has excellent dividend safety and growth potential. In our view, the longer-term fundamental story for Phillips 66 and the broader industry continues to look positive as refining capacity remains constrained and more advantaged crude flows through North American pipelines. At this time, Philips 66 remains our favorite idea in the refinery space and a holding in the portfolio … Read more

Headline Risk Entering the Market

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The summer months have been relatively uneventful, with the exception of concerns relating to the Federal Reserve’s coming tapering of its bond-buying program and quibbles between hedge fund giants over a company that makes protein shakes—we’re talking about Herbalife (HLF) in the latter example. Even the sequester proved to be a largely underwhelming event so far through 2013. As a result, the market has focused on fundamentals, awarding strong performance and punishing poor performance (almost irrespective of valuation parameters). However, the market remains fully valued at current levels, with the forward price-to-earnings ratio on S&P 500 companies in-line with its 10-year average at 14.1 times, and the distribution of our Valuentum Buying Index ratings tilting decidedly negative. The forward price-to-earnings … Read more

Digging into Phillips 66’s Results: Earnings Decline Not Tragic

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Dividend Growth Newsletter portfolio holding Phillips 66 (click ticker for report: ) announced slightly weaker than anticipated second quarter earnings Wednesday morning, which isn’t too surprising after the insight we received from peer Valero (click ticker for report: ). Revenue declined 8% year-over-year to $43.9 billion, which was actually above estimates but not materially important for Phillips 66. Earnings per share declined 33% to $1.50 per share, falling well short of consensus expectations. Free cash flow remained relatively strong at $597 million during the quarter, and year-to-date, it stands at $2.4 billion. Image Source: PSX 2Q 2013 Investor Presentation Where did Phillips 66 earnings weakness come from? Without question, it was the firm’s refining margin. Advantaged crude remained flat as … Read more

Valero Will Miss Big in the Second Quarter

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Refiner Valero (click ticker for report: ) preannounced weak second-quarter results Thursday afternoon. Including a $0.05 per share charge for spinoff-related expenses and other charges related to environmental and legal matters, the company plans to earn between $0.80 and $0.90 per share during the second quarter of 2013, nowhere near the consensus estimate calling for earnings of $1.27 per share and well short of last year’s $1.50 per share. The firm’s interim-update release was very brief, but Valero blamed “lower discounts for heavy sour crude oil, higher natural gas costs, higher costs to comply with the Renewable Fuels Standard, and turnaround and maintenance activity at the Quebec City, McKee, Meraux, and Port Arthur refineries.” Discounts for heavy sour crude oil … Read more

Dividend Growth Holding Phillips 66’s Earnings Boom

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Earlier this week, Dividend Growth Newsletter holding Phillips 66 (click ticker for report: ) reported strong first quarter results on the back of fantastic refining margins. Adjusted earnings per share surged 83% year-over-year to $2.19, handily exceeding consensus estimates. The firm generated over $1.4 billion in free cash flow which it returned to shareholders in part via the repurchase of 6.4 million shares for $382 million and $194 million in dividends. Refining profitability drove a high percentage of the earnings growth at Phillips 66, as refining profits doubled to $909 million. The firm realized a profit margin of $13.94 per barrel. Advantaged crude, which the firm purchases at a discount to relative global benchmarks, jumped 800 basis points year-over-year to … Read more

Refining Stocks Are Shaping Up to Have a Strong 2013

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A number of refiners recently reported strong results in their respective fourth quarters. We had been watching the group’s tremendous performance via Phillips 66 (PSX), a holding in our Dividend Growth portfolio, but let’s dig into the firm’s peers to highlight a few industry trends. Valero On Tuesday, Valero (click ticker for report: ) announced a “blowout” fourth quarter, with earnings growing to $1.82 from $0.08 per share, trouncing the consensus estimate. Revenue was roughly flat, so what drove such substantial earnings growth? CEO Bill Klesse said it best: “Also in the fourth quarter of 2012, we replaced all imported light foreign crude oils with cheaper domestic crude oils at our Gulf Coast and Memphis refineries. Since we expect U.S. … Read more

Big Energy Earnings Roundup

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Image Source: Exxon Mobil Corporation – Third Quarter 2019 Earnings Presentation By Callum Turcan In alphabetical order by ticker: COP, CVX, RDS, TOT, XOM ConocoPhillips On October 29, upstream super-independent ConocoPhillips (COP) reported third quarter earnings for 2019. Its adjusted underlying oil and gas output rose by 7% year-over-year to over 1.3 million BOE/d in the quarter. Conoco sold off most of its UK operations (through a deal announced in April 2019), which were primarily represented by mature offshore oil and gas fields and a stake in the Clair oilfield, raising approximately $2.2 billion in net cash proceeds when the deal was completed in the third quarter. That transaction will see Conoco’s upstream output move lower sequentially in the fourth … Read more

2,350-2,750 on the S&P? Could the Coronavirus Catalyze a Financial Crisis?

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Image: We think a rather modest sell-off in the market to the target range of 2,350-2,750 on the S&P 500 is rather reasonable in the wake of one of the biggest economic shocks since the Global Financial Crisis. The chart above shows how far markets have advanced since 2011, and an adjustment lower to the target range of 2,350-2,750 is rather modest in such a context and would only bring markets to late 2018 levels (note red box as the target range). The range reflects ~16x S&P 500 12-month forward earnings estimates, as of February 14, adjusted down 10% due to COVID-19. When companies like Visa talk about a couple percentage points taken off of growth rates, one knows that … Read more