The company trades at a price-to-earnings multiple of just 11.8 using adjusted earnings-per-share. The company has an above-average 2.7% dividend yield as well.
At first glance, Phillips 66 appears undervalued. This article takes a deeper look into the company’s operations to determine if the company really is a bargain… Or a value trap.
Phillips 66 (PSX) is one of the world’s largest downstream oil corporations. The company has a market cap of 44.4 billion.
Phillips 66 Business Overview
Phillips 66 operates in 4 segments. Each segment is shown below along with the percentage of adjusted income each has generated for Phillips 66 through the first 6 months of fiscal 2015:
– Refining: 53% of adjusted earnings
– Midstream: 6% of adjusted earnings
– Chemicals: 24% of adjusted earnings
– Marketing & Specialties: 18% of adjusted earnings
The Refining segment owns or has a stake in 15 refineries. These 15 refineries have a net crude oil capacity of 2.2 million barrels per day. The image below shows the geographical breakdown of the segment:
The Midstream segment is Phillips 66’s smallest based on adjusted earnings – responsible for just 6% of adjusted earnings through the first half of 2015. The Midstream segment owns oil and gas storage and transport assets in the US. Assets include:
– 72% ownership of Phillips 66 Partners (PSXP)
– 50% ownership of DCP Midstream LLC
The Chemicals segment consists of a 50%-50% joint partnership with Chevron; Chevron-Phillips Chemical Company (referred to here-on-out as CPChem). CPChem has 35 global manufacturing sites and is the largest producer of high density polyurethane in the United States.