Stock Analysis on Net

Phillips 66 (NYSE:PSX)

This company has been moved to the archive! The financial data has not been updated since February 21, 2020.

Economic Value Added (EVA)

Microsoft Excel

Economic Profit

Phillips 66, economic profit calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net operating profit after taxes (NOPAT)1 5,344 5,129 4,664 4,480 3,281
Cost of capital2 11.61% 12.20% 12.10% 11.96% 12.33%
Invested capital3 50,827 48,544 49,009 46,215 42,469
 
Economic profit4 (559) (796) (1,269) (1,046) (1,954)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 5,34411.61% × 50,827 = -559

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Phillips 66 economic profit increased from 2017 to 2018 and from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

Phillips 66, NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net income attributable to Phillips 66 3,076 5,595 5,106 1,555 4,227
Deferred income tax expense (benefit)1 182 252 (1,889) 610 483
Increase (decrease) in allowances2 19 (7) (5) (21) (16)
Increase (decrease) in LIFO reserve3 1,400 (1,400) 1,000 2,000 (1,700)
Increase (decrease) in equity equivalents4 1,601 (1,155) (894) 2,589 (1,233)
Interest and debt expense 458 504 438 338 310
Interest expense, operating lease liability5 48 61 69 59 77
Adjusted interest and debt expense 506 565 507 397 387
Tax benefit of interest and debt expense6 (106) (119) (178) (139) (135)
Adjusted interest and debt expense, after taxes7 400 446 330 258 251
Interest income (43) (45) (31) (18) (27)
Investment income, before taxes (43) (45) (31) (18) (27)
Tax expense (benefit) of investment income8 9 9 11 6 9
Investment income, after taxes9 (34) (36) (20) (12) (18)
Net income (loss) attributable to noncontrolling interest 301 278 142 89 53
Net operating profit after taxes (NOPAT) 5,344 5,129 4,664 4,480 3,281

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowances.

3 Addition of increase (decrease) in LIFO reserve. See details »

4 Addition of increase (decrease) in equity equivalents to net income attributable to Phillips 66.

5 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,261 × 3.80% = 48

6 2019 Calculation
Tax benefit of interest and debt expense = Adjusted interest and debt expense × Statutory income tax rate
= 506 × 21.00% = 106

7 Addition of after taxes interest expense to net income attributable to Phillips 66.

8 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 43 × 21.00% = 9

9 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Phillips 66 NOPAT increased from 2017 to 2018 and from 2018 to 2019.

Cash Operating Taxes

Phillips 66, cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Income tax expense (benefit) 801 1,572 (1,693) 547 1,764
Less: Deferred income tax expense (benefit) 182 252 (1,889) 610 483
Add: Tax savings from interest and debt expense 106 119 178 139 135
Less: Tax imposed on investment income 9 9 11 6 9
Cash operating taxes 716 1,429 363 70 1,407

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Phillips 66 cash operating taxes increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level.

Invested Capital

Phillips 66, invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Short-term debt 547 67 41 550 44
Long-term debt 11,216 11,093 10,069 9,588 8,843
Operating lease liability1 1,261 1,391 1,608 1,372 1,756
Total reported debt & leases 13,024 12,551 11,718 11,510 10,643
Stockholders’ equity 24,910 24,653 25,085 22,390 23,100
Net deferred tax (assets) liabilities2 5,505 5,226 4,917 6,651 5,880
Allowances3 41 22 29 34 55
Estimated excess of current replacement cost over LIFO cost of inventories4 4,300 2,900 4,300 3,300 1,300
Equity equivalents5 9,846 8,148 9,246 9,985 7,235
Accumulated other comprehensive (income) loss, net of tax6 788 692 617 995 653
Noncontrolling interests 2,259 2,500 2,343 1,335 838
Adjusted stockholders’ equity 37,803 35,993 37,291 34,705 31,826
Invested capital 50,827 48,544 49,009 46,215 42,469

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of LIFO reserve. See details »

5 Addition of equity equivalents to stockholders’ equity.

6 Removal of accumulated other comprehensive income.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Phillips 66 invested capital decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Cost of Capital

Phillips 66, cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 39,221 39,221 ÷ 53,683 = 0.73 0.73 × 14.67% = 10.72%
Debt3 13,201 13,201 ÷ 53,683 = 0.25 0.25 × 4.25% × (1 – 21.00%) = 0.83%
Operating lease liability4 1,261 1,261 ÷ 53,683 = 0.02 0.02 × 3.80% × (1 – 21.00%) = 0.07%
Total: 53,683 1.00 11.61%

Based on: 10-K (reporting date: 2019-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 44,290 44,290 ÷ 56,793 = 0.78 0.78 × 14.67% = 11.44%
Debt3 11,111 11,111 ÷ 56,793 = 0.20 0.20 × 4.39% × (1 – 21.00%) = 0.68%
Operating lease liability4 1,391 1,391 ÷ 56,793 = 0.02 0.02 × 4.39% × (1 – 21.00%) = 0.08%
Total: 56,793 1.00 12.20%

Based on: 10-K (reporting date: 2018-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 46,029 46,029 ÷ 58,724 = 0.78 0.78 × 14.67% = 11.50%
Debt3 11,088 11,088 ÷ 58,724 = 0.19 0.19 × 4.31% × (1 – 35.00%) = 0.53%
Operating lease liability4 1,608 1,608 ÷ 58,724 = 0.03 0.03 × 4.31% × (1 – 35.00%) = 0.08%
Total: 58,724 1.00 12.10%

Based on: 10-K (reporting date: 2017-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 40,731 40,731 ÷ 52,811 = 0.77 0.77 × 14.67% = 11.31%
Debt3 10,708 10,708 ÷ 52,811 = 0.20 0.20 × 4.32% × (1 – 35.00%) = 0.57%
Operating lease liability4 1,372 1,372 ÷ 52,811 = 0.03 0.03 × 4.32% × (1 – 35.00%) = 0.07%
Total: 52,811 1.00 11.96%

Based on: 10-K (reporting date: 2016-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 42,244 42,244 ÷ 52,692 = 0.80 0.80 × 14.67% = 11.76%
Debt3 8,692 8,692 ÷ 52,692 = 0.16 0.16 × 4.38% × (1 – 35.00%) = 0.47%
Operating lease liability4 1,756 1,756 ÷ 52,692 = 0.03 0.03 × 4.38% × (1 – 35.00%) = 0.09%
Total: 52,692 1.00 12.33%

Based on: 10-K (reporting date: 2015-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Phillips 66, economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 (559) (796) (1,269) (1,046) (1,954)
Invested capital2 50,827 48,544 49,009 46,215 42,469
Performance Ratio
Economic spread ratio3 -1.10% -1.64% -2.59% -2.26% -4.60%
Benchmarks
Economic Spread Ratio, Competitors4
Chevron Corp. -12.86%
ConocoPhillips -0.61%
Exxon Mobil Corp. -5.91%
Marathon Petroleum Corp. -3.26%
Occidental Petroleum Corp. -10.78%
Valero Energy Corp. -3.42%

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -559 ÷ 50,827 = -1.10%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Phillips 66 economic spread ratio improved from 2017 to 2018 and from 2018 to 2019.

Economic Profit Margin

Phillips 66, economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 (559) (796) (1,269) (1,046) (1,954)
Sales and other operating revenues 107,293 111,461 102,354 84,279 98,975
Performance Ratio
Economic profit margin2 -0.52% -0.71% -1.24% -1.24% -1.97%
Benchmarks
Economic Profit Margin, Competitors3
Chevron Corp. -17.99%
ConocoPhillips -1.07%
Exxon Mobil Corp. -7.01%
Marathon Petroleum Corp. -2.15%
Occidental Petroleum Corp. -44.48%
Valero Energy Corp. -1.29%

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales and other operating revenues
= 100 × -559 ÷ 107,293 = -0.52%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Phillips 66 economic profit margin improved from 2017 to 2018 and from 2018 to 2019.