In Wednesday morning’s trading, oil stock Phillips 66 (NYSE:PSX) added over 3.5% to its shares, mostly thanks to one good piece of news. Elliott Investment Management made a substantial investment in the company, throwing a 10-figure sum in behind it and picking up some board slots. That was enough to catch investors’ attention as well, and the share price surged accordingly.
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Elliott threw a whopping $1 billion in to land a stake in Phillips 66 and also started a campaign for two board seats. Elliott is out to improve Phillips 66’s performance, and the billion bucks and a couple of board seats may have sufficient mojo to make a difference. After all, Elliott notes, several of its competitors have been outperforming PSX for years, and that’s largely thanks to Phillips 66 moving away from its refinery business.
Room to Do Better
While Phillips 66 shares are up, they’re not up anywhere near what the rest of the field is, especially when measured over a three-year period. Additionally, Phillips 66’s operating expenses, when measured on a per-barrel basis, are also on the rise, and Elliott looks to stem that tide before it’s too late. Interestingly, Elliott is behind Mark Lashier‘s (Phillips 66’s current CEO) plan to turn the company around.
Though Elliott’s endorsement on this one is a bit backhanded, Elliott is behind the plan but expects to see “meaningful progress” in the next year, lest that support be pulled. Lashier is focused on improving the company’s performance through a multi-faceted approach: a $1 billion “improvement” to its refining business, the sale of non-core assets valued at $3 billion, and an enhancement of the company’s long-term capital return policy.
Is Phillips 66 a Good Stock to Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on PSX stock based on nine Buys and four Holds assigned in the past three months, as indicated by the graphic below. After a 17.26% rally in its share price over the past year, the average PSX price target of $131.64 per share implies 7.61% upside potential.
