TD Cowen cuts Phillips 66 target to $127, maintains Buy rating

On Tuesday, TD Cowen adjusted its outlook on Phillips 66 (NYSE:PSX), currently trading at $97.64, lowering the price target to $127 from $130, while still endorsing the stock with a Buy rating. According to InvestingPro data, analyst targets for PSX range from $106 to $162, suggesting significant upside potential. The adjustment comes amid expectations of a 15% shortfall to the consensus for Phillips 66’s first-quarter 2025 EBITDA. The revised estimate incorporates an increase in refining operational expenses by $200 million and a reduction of $100 million from lower Productivity Tax Credit ( PTC (NASDAQ:PTC)) capture.

Analysts at TD Cowen have also forecasted that Phillips 66 will continue its share repurchase program, buying back $200 million worth of shares per quarter through fiscal year 2025, followed by $1.1 billion in fiscal year 2026. These repurchases, combined with the company’s attractive 4.7% dividend yield, are anticipated to yield a 6.7% return for shareholders. Additionally, the company’s chemical segment exposure is seen as a potential risk factor due to the volatility associated with US/China tariffs, which could introduce further complications. For deeper insights into PSX’s financial metrics and growth potential, investors can access comprehensive analysis through InvestingPro’s detailed research reports.

Phillips 66’s response to recent activist pressures is also under scrutiny. The company, currently showing a FAIR Financial Health Score of 2.29 according to InvestingPro analysis, is expected to defend its integrated structure, which has been challenged by activists urging the company to provide more transparency about its refining performance compared to its peers. The analysts suggest that some refining earnings may be stored within the Midstream and Marketing segments, a move that could be influencing the company’s valuation premium. The extent to which Phillips 66 will clarify these earnings allocations remains uncertain, as acknowledging the inclusion of such earnings in higher-multiple segments could potentially diminish its valuation premium. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued.

In other recent news, Phillips 66 is at the center of several significant developments. UBS analysts have maintained a Buy rating for Phillips 66, setting a price target of $144, despite projecting a first-quarter loss. The firm adjusted its earnings estimate to a loss of $0.80 per share, citing increased depreciation and amortization expenses following the closure of the Los Angeles refinery. Meanwhile, Elliott Investment Management has been actively campaigning for changes in Phillips 66’s board, nominating Stacy Nieuwoudt and launching the Streamline 66 Podcast to introduce its director candidates and share industry insights. Gregory J. Goff, a seasoned energy executive, has endorsed Elliott’s nominees, emphasizing the need for stronger corporate governance at Phillips 66. In response, Phillips 66 has refuted claims made by Elliott-backed Goff, highlighting a conflict of interest due to his role with a competitor. The company remains confident in its strategy, citing $43 billion returned to shareholders through dividends and stock repurchases. These developments come as both Phillips 66 and Elliott Management prepare for the upcoming 2025 Annual Meeting of Shareholders.

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