Phillips 66 (PSX) Earnings Expected to Rise: Should You Buy?

The market is expecting Phillips 66 (PSX) to deliver year-over-year earnings growth on lower revenue when it reports results for the quarter ended March 2023. This widely known consensus forecast is important when assessing the company’s earnings situation, but a strong factor that could affect its stock price in the near term is how well actual results compare to those estimates.

Shares could move higher if these key numbers meet expectations in the upcoming earnings report, due on May 3. On the other hand, if these key numbers are not met, the stock could fall.

While the sustainability of the immediate price movement and future earnings expectations will largely depend on management’s discussion of business conditions during the earnings call, it is worth limiting the likelihood of a positive EPS surprise.

Zacks Consensus Estimate

The oil refiner is expected to report quarterly earnings of $3.66 per share in its upcoming report, which would represent a year-over-year change of +177.3%.

Revenue is expected to be $30.94 billion, down 15.8% from the prior-year quarter.

Estimate revision trend

The consensus EPS estimate for the quarter has been revised upwards by 10.9% over the last 30 days to the current level. This broadly reflects how analysts covering the data have collectively re-evaluated their initial estimates during this period.

Investors should note that the direction of each analyst’s estimate revisions may not always be reflected in the aggregate changes.

Whisper about earnings

Estimate revisions prior to a company’s earnings release provide an indication of business conditions during the earnings release period. Our proprietary surprise forecast model – Zacks Earnings ESP (Expected Surprise Prediction) – has this insight at its core.

The Zacks Earnings ESP compares the Most Accurate Estimates to the Zacks Consensus Estimates for the quarter; The Most Accurate Estimate is a newer revision of the Zacks Consensus EPS Estimate. The idea is that analysts reviewing their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and other consensus participants had previously predicted.

So a positive or negative Earnings ESP reading theoretically indicates a likely deviation of actual earnings from consensus estimates. However, the model’s predictive power is only significant for positive ESP readings.

A positive Earnings ESP is a strong predictor of an earnings beat, especially when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold). Our research shows that stocks with this combination deliver a positive surprise almost 70% of the time, and a solid Zacks Rank actually boosts the predictive power of Earnings ESP.

It’s important to remember that a negative Earnings ESP reading does not indicate an earnings miss. Our research shows that it’s difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank 4 (Sell) or 5 (Strong Sell).

How do the numbers stack up for Phillips 66?

In the case of Phillips 66, the Most Accurate Estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently become bearish on the company’s earnings prospects. This has led to an Earnings ESP of -1.93%.

On the other hand, the stock currently has a Zacks Rank of #3.

So this combination makes it difficult to clearly predict that Phillips 66 will beat consensus EPS estimates.

Are the financial results surprising? Does history matter?

When calculating a company’s future earnings estimates, analysts often consider how well it matched previous consensus estimates. So it’s worth looking at a surprising story to assess its impact on the upcoming numbers.

For the last reported quarter, it was expected that Phillips 66 would post earnings of $4.34 per share when the actual result was $4, delivering a surprise of -7.83%.

The company has beaten consensus EPS estimates three times over the last four quarters.

Bottom Line

Improving or lacking earnings may not be the sole basis for a stock’s value rising or falling. Many stocks lose value despite good earnings because of other factors that disappoint investors. Similarly, unforeseen catalysts help many stocks gain despite losing profits.

That said, betting on stocks that are expected to exceed earnings expectations increases your chances of success. Therefore, it is worth checking the company’s Earnings Rank and Zacks Rank before their quarterly release. Use our Earnings ESP filter to find the best stocks to buy or sell before they report.

Phillips 66 doesn’t seem like a compelling candidate for better financial results. However, investors should pay attention to other factors when betting on these stocks or staying away from them ahead of the earnings release.

Expected results of an industry player

Zacks Oil and Gas – Refining and Marketing Marathon Petroleum (MPC) stock is expected to post earnings of $5.44 per share for the quarter ended March 2023. This estimate represents a year-over-year change of +265.1%. Revenue for the quarter is expected to be $31.66 billion, down 17.5% from the same quarter last year.

The consensus EPS estimate for Marathon Petroleum has been revised up 4.1% in the last 30 days to current level. However, the equal Most Accurate Estimate puts the Earnings ESP at 0.00%.

Combined with the Zacks Rank #1 (Strong Buy), this Earnings ESP makes it difficult to clearly predict that Marathon Petroleum will beat consensus EPS estimates. The company has beaten consensus EPS estimates in each of the trailing four quarters.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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