Phillips 66 stock: UBS reiterates Buy rating on refining expansion

Investing.com - UBS has reiterated its Buy rating and $143.00 price target on Phillips 66 (NYSE:PSX), currently trading at $133.27, following the company’s expansion of its refining operations. With a market cap of $53.9 billion and an attractive 3.66% dividend yield, InvestingPro analysis suggests the stock is currently undervalued.

Phillips 66 recently entered into a definitive agreement to acquire the remaining 50% ownership interest in WRB Refining LP from Cenovus Energy subsidiaries for $1.4 billion in cash, according to UBS.

The investment bank noted that the Central Corridor remains Phillips 66’s most profitable region, and the company is expanding its presence there at approximately 3.1 times EBITDA, with UBS expecting these assets to generate higher profits in 2026 than in 2025.

UBS highlighted that widening Western Canadian Select (WCS) differentials should benefit the acquired assets, enhancing the value of the transaction for Phillips 66.

The firm also pointed to potential benefits for Phillips 66 from Russian outages that have resulted in lower diesel exports and higher fuel oil exports, particularly through the company’s Bayway facility, which houses one of North America’s largest fluid catalytic crackers, and its extensive Gulf Coast fuel oil blending program.

In other recent news, Phillips 66 reported strong earnings for the second quarter of 2025, with adjusted earnings reaching $973 million, or $2.38 per share, and operating cash flow totaling $1.9 billion, excluding working capital. The company attributed this performance to high refining utilization and strategic shareholder returns. In a significant move, Phillips 66 announced an agreement to acquire the remaining 50% stake in WRB Refining LP from Cenovus Energy Inc. for $1.4 billion, which will enhance its refining capacity by approximately 250,000 barrels per day.

Analyst firms have responded positively to Phillips 66’s performance, with UBS raising its price target to $143, noting the company’s competitive business model and operational improvements. Similarly, TD Cowen increased its price target to $134, highlighting the company’s strong refining quarter and reduced operational expenses. Additionally, Phillips 66 appointed Sean Maher as vice president of investor relations and chief economist, effective October 1, succeeding Jeff Dietert, who is retiring. These developments reflect Phillips 66’s strategic initiatives and operational efficiency in the energy sector.

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