Why Is Phillips 66 (PSX) Down 2.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Phillips 66 (PSX). Shares have lost about 2.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Phillips 66 due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Phillips 66 Q2 Earnings Beat on Lower Operating Costs

Phillips 66 reported second-quarter 2020 adjusted loss per share of 74 cents, narrower than the Zacks Consensus Estimate of a loss of 99 cents. The company reported adjusted earnings of $3.02 per share in the year-ago quarter.

Quarterly revenues totaled $11.2 billion, down from the year-ago quarter’s $28.5 billion. Moreover, the top line missed the Zacks Consensus Estimate of $14.9 billion.

The better-than-expected earnings were supported by lower operating costs and expenses. However, the positives were partially offset by lower midstream, chemicals and refining contributions. Lower refined product demand due to the coronavirus pandemic affected the company’s businesses in the second quarter.

In July, it loaded the first export cargo from the South Texas Gateway Terminal. The West Coast retail marketing JV acquired 95 sites, which will likely boost its exposure to retail margins. In the second quarter, the company started full operations of the Gray Oak Pipeline. Moreover, it incorporated 7.5 million barrels of storage capacity at Clemens Caverns in the Sweeny Hub.

Segmental Results

Midstream

The segment generated adjusted pre-tax quarterly earnings of $245 million, down from $423 million in the year-ago quarter. Profits from NGL and Other, and DCP Midstream significantly decreased in the second quarter. Also, lower pipeline and terminal volumes affected its transportation income.

Chemicals

Adjusted pre-tax earnings of $89 million were down from $275 million in the prior-year quarter. CPChem’s O&P business was affected by lower sales prices and higher feedstock costs. Its O&P utilization rate came in at 103%.

Refining

It reported adjusted pre-tax loss of $867 million against year-ago earnings of $983 million. This underperformance was attributed to reduced volumes and weak margins. The segment’s realized refining margins on a worldwide basis fell to $2.60 per barrel from the year-ago quarter’s $11.37. Moreover, the same in Atlantic Basin/Europe and West Coast fell to $1.53 and $5.05 per barrel from the year-ago levels of $10.85 and $9.94, respectively.