Phillips 66

Methodology

Phillips 66's refining earnings are extremely cyclical with crack spreads, while midstream and chemicals provide some stability. It's essential to use mid-cycle normalized earnings rather than peak or trough refining conditions. Assess sustainable earnings across industry cycles and value each business segment separately given different margin drivers.

Methodology

PEG analysis is challenging for Phillips 66 given volatile refining earnings that create unsustainable growth or contraction periods. During strong crack spreads, low PEG ratios are misleading. Focus on integrated value from refining, midstream, and chemicals rather than earnings growth for this diversified downstream energy company.

Methodology

Phillips 66 offers meaningful dividends and variable buybacks that adjust with refining profitability. The dividend provides value though sustainability depends on crack spread levels. PEGY can look attractive at cycle peaks but misleads about sustainable returns given refining volatility offsetting more stable midstream contributions.