Stock Analysis | Phillips 66 Outlook - Technical Weakness and Mixed Signals Weigh on Investor Sentiment

Market Snapshot

Phillips 66 (PSX.N) is under pressure on technical indicators and mixed analyst views, despite some positive fundamentals. While the stock has seen a 1.24% rise recently, the technical outlook is bearish and the internal diagnostic score is only 3.77 out of 10, suggesting caution.

News Highlights

• Nigeria's Tinubu Announces Fresh Incentives for Oil Sector - President Tinubu has issued an executive order aimed at cutting costs and boosting investment in the oil and gas sector. This could indirectly benefit Phillips 66, which operates in multiple global markets.
• OPEC+ Considers a Larger Output Hike in July - The group is reportedly planning to increase oil output by more than 411,000 bpd, which could dampen oil prices and affect Phillips 66’s margins.
• Indian Crude Oil Duty Cut Lauded by Industry - India reduced its crude oil customs duty, which should help domestic refiners and may support crude prices in the medium term, providing some tailwinds for Phillips 66’s refining operations.

Analyst Views & Fundamentals

Analysts remain neutral on Phillips 66, with a simple average rating of 3.00 and a performance-weighted score of 1.65. The ratings are not consistent and show some dispersion, with one analyst rating the stock as "neutral" in the past 20 days. This contrasts with a recent 1.24% price rise, indicating a potential mismatch between expectations and actual market behavior.

Key fundamental values and their model scores:

• Price-to-Book (PB) Ratio: 0.82 (8.18% discount to book) - Model score: 2 out of 10 (low PB is positive but not enough to justify strong investment).
• Net Profit Margin: -1.03% - Model score: 3 out of 10 (weak profitability raises concerns).
• Inventory Turnover Ratio: 11.85% - Model score: 3 out of 10 (efficient, but not a standout).
• Net Income to Revenue: -1.03% - Model score: 3 out of 10 (loss on revenue is a red flag).
• Income Tax / Total Profit: 18.89% - Model score: 4 out of 10 (moderate tax burden).
• Long-Term Debt to Working Capital Ratio: 19.86% - Model score: 1 out of 10 (high leverage is concerning).
• Asset-to-Market Value Ratio: 0.72 - Model score: 3 out of 10 (fairly valued relative to assets).

Money-Flow Trends

Big-money investors are showing a net outflow, while retail (small) investors are showing a positive trend. Here's the breakdown:

• Big-money inflow ratio: 49.43% - indicating a negative trend from large players.
• Medium-money inflow ratio: 50.38% - leaning positive.
• Small-money inflow ratio: 52.65% - clearly positive.

With an overall fund-flow score of 7.91 (good), the stock is showing some retail support, but big-money players are cautious or withdrawing capital.

Key Technical Signals

Technical indicators remain a concern, with 2 bearish signals and 0 bullish ones over the past five days. The overall technical score is 3.77 out of 10, indicating a weak setup and suggesting investors should avoid or closely monitor the stock.

• Williams %R Overbought - Internal diagnostic score: 3.38 (weak overbought signal, not a strong reversal indicator).
• RSI Overbought - Internal diagnostic score: 1 (very bearish, indicating overbought conditions and potential pullback).
• Dividend Payable Date - Internal diagnostic score: 6.92 (neutral to positive, but not enough to offset the bearish indicators).

Recent chart patterns show overbought conditions on both the RSI and Williams %R indicators as of September 2, with the overbought pattern persisting from August 26 through August 29. This suggests the market may be preparing for a correction or consolidation phase.

Conclusion

Given the bearish technical signals, mixed analyst views, and weak profitability, we suggest investors consider waiting for a clearer trend or pullback before entering Phillips 66 (PSX.N). Watch the upcoming earnings and how the stock reacts to OPEC+ supply decisions in July, which could impact both crude prices and refining margins.