Deutsche Bank upgraded Phillips 66 PSX Thursday from Hold to Buy and lowered its price target from $101 to $92. The company was selected as a Top Pick.
Analyst Ryan Todd noted that “Since our launch of coverage in October 2014, PSX was arguably our biggest non-consensus call. Given the more attractive valuation following the ~20 percent drop in the share price (QTD, through 12/15, vs peers at -1 percent on average) coupled with our more cautious stance on refiners as we head into 2015, we upgrade PSX to Buy.”
Todd commented, “Although fears of margin pressure on PSX’s CPChem and DCP segments are somewhat warranted given the oil price backdrop, we believe the stock price is pricing in a fairly draconian scenario as investors overstate PSX’s exposure; on our SOTP analysis, investors are getting the refiner segment essentially for free.”
The analyst note concluded that “PSX remains the “non-refining refiner” (our title for the company in our October 2014 initiation). With only 30 percent of total equity value coming from the refining segment, we believe the company remains far more defensive; as an order of magnitude, zero’ing out the value for the refining business in our SOTP analysis, gets us to equity value of ~$67.40/sh or 1.4 percent below Wednesday’s closing share price.”
Phillips 66 recently traded at $67.05, down 1.9 percent.
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