Phillips 66’s Strategic Uncertainty and Operational Challenges Justify Hold Rating

Joe Laetsch, an analyst from Morgan Stanley, maintained the Hold rating on Phillips 66 (PSX – Research Report). The associated price target remains the same with $122.00.

Joe Laetsch has given his Hold rating due to a combination of factors surrounding Phillips 66’s current strategic and operational situation. The recent shareholder vote, which resulted in a split decision between Phillips 66’s and Elliott Investment Management’s nominees, indicates a divided sentiment among shareholders. This suggests that while some of Elliott’s proposals, such as improving refining performance and streamlining the portfolio, have resonated, there is no clear consensus on the company’s direction.
Furthermore, the election of two Elliott-backed nominees, who bring significant refining and midstream experience, highlights the ongoing focus on enhancing operational efficiency. Despite Phillips 66’s efforts to reduce operating expenses per barrel and its targeted improvements, the company’s refining EBITDA projections still lag behind its mid-cycle targets. This, combined with the debate over the value of integration versus potential divestments, contributes to the cautious outlook, justifying the Hold rating.

In another report released on May 13, Mizuho Securities also maintained a Hold rating on the stock with a $138.00 price target.