Phillips 66 Beats Q2 EPS Estimate by USD 2.39, Shares Fall 2.32% on Revenue Miss

Phillips 66 reported adjusted earnings of USD 9.41 per share for the second quarter of 2026, well above the Wall Street estimate of USD 7.02, but the stock fell 2.32% in pre-market trading to USD 201.12 from a previous close of USD 205.89.

Revenue came in at USD 42.1 billion, USD 1.31 billion or 3.02% short of the USD 43.41 billion analysts had penciled in. Reported earnings per share were USD 9.55 and adjusted earnings reached USD 3.8 billion.

The quality of the beat is the question the market appears to be pricing. Phillips 66 said it benefited from roughly USD 450 million in favorable mark-to-market effects across refining, marketing and specialties, and renewable fuels. Strip that out and the gap to the USD 7.02 consensus narrows considerably.

Cash generation held up. The refiner produced USD 4.3 billion in operating cash flow excluding working capital. Capital expenditure for the quarter was USD 726 million.

Shareholder returns totaled USD 887 million, split between USD 379 million of share repurchases and USD 508 million of dividends. The board approved a USD 10 billion increase to the buyback authorization, and the company declared a quarterly dividend of USD 1.27 per share.

Balance sheet reduction remains the stated priority. Total debt stood at USD 20.6 billion at quarter end, net debt at USD 16.5 billion, against cash of USD 4.1 billion. Management is targeting total debt of USD 17 billion by the end of 2027 and net debt below USD 16 billion by the end of 2026, with a subsequent target of roughly USD 13.5 billion. Jefferies projects debt falling to about USD 19 billion by the end of 2026, with the company aiming for around USD 17 billion by the first quarter of 2027.

For the third quarter, Phillips 66 guided to turnaround costs of USD 100 million to USD 120 million and corporate and other costs of USD 325 million to USD 350 million.

The first quarter set a low bar. Phillips 66 posted USD 0.49 per share on revenue of USD 35.21 billion. Consensus going into the second-quarter print had called for USD 7.36 per share on USD 43.41 billion, with revenue seen up 28.55% year on year on higher throughput and stronger refining and chemicals margins. Analyst estimates had risen 11.68% over the preceding 60 days.

Sell-side targets clustered near the trading price ahead of the release. The stock carried a consensus buy rating from 20 analysts with an average target of USD 207.53 against a trading level near USD 206.19. UBS lifted its target to USD 235 from USD 212 in late July while keeping a Buy rating, with Jefferies and Goldman Sachs also raising their objectives. Jefferies moved to USD 207 on a Hold rating, modeling USD 7.55 per share for the second quarter.

UBS built its case on midstream, which it called the "aorta" of the integrated model. The segment posted adjusted EBITDA of USD 2.6 billion in 2022. Quarterly midstream EBITDA reached approximately USD 1 billion by mid-2026 and is expected to grow to an annual run rate of USD 4.5 billion by the end of 2027. UBS attributes that trajectory to roughly USD 150 million of operational improvements and USD 350 million of organic growth projects, including the Coastal Bend expansion, Iron Mesa, and continued development of Dos Picos II. Total EBITDA over the trailing twelve months was USD 7.04 billion, and 14 analysts revised earnings forecasts upward.

The refining backdrop has tightened. United States refining capacity fell 1.43% in 2025 according to Energy Information Administration data, attributed to the conversion of a Houston refinery and the closure of a facility in the Los Angeles area. Phillips 66, headquartered in Houston, is raising aviation fuel production at its refinery in Washington state, the company said.

Shares trade within a 52-week range of USD 118.07 to USD 216.08, about 6.9% below the high and roughly 70.3% above the low. InvestingPro estimates fair value at USD 221.68 against a recent trading level of USD 205.