(By Rich Bieglmeier) It's not been all bad for companies that recently started trading publicly. While Facebook, Inc.
) grabs most of the headlines for its shrinking stock price, some more successful launches are hidden quietly in plain sight.
Phillips 66 (PSX) is the 2nd largest U.S. independent refiner after its successful spinoff from ConocoPhillips on May 1st of the year. On Wednesday, Phillips 66 reported earnings for the first time as a new, standalone company and the results were impressive.
Net income rose to $1.18 billion from $1.04 billion, the prior year and earnings rose to or $1.86 a share versus $1.64 a year earlier. Minus a bunch of one-time costs, earnings per share would have been $2.23, which is 45 cents higher than the street censuses of $1.78 – not a bad way to start.
On July 11, 2012, management announced its first dividend of 20 cents pershare, per quarter. At PSX's close on August 1, it represents a yield of 2.1%. In making the announcement, Chairman and CEO Greg C. Garland said, "Phillips 66 has a clear strategy to improve returns and to deliver a strong, competitive dividend program to our investors. We are convinced that returns, growth and distributions create value."
In Wednesday's post-earnings conference call, Garland added some color saying, "As part of our plans to increase distribution to shareholders, our Board of Directors declared a $0.20 dividend to be paid in the third quarter. We expect to have modest dividend increases in the range of about 5% a year. We want to look back in 10 years and say, we increased the dividend every year at this company."
Beyond excellent earnings and nice talk about dividend increases, Phillips 66 announced a $1 billion, yes $1 BILLION share repurchase program. The quarter was so impressive that Barclays Capital upgraded the stock to Overweight from Equal Weight and jacked its price target to $60 from $37.
During PSX's limited time on its own two feet, the refinery has attracted a noteworthy shareholder, Warren Buffet's Berkshire Hathaway Inc. (BRK-B) (there's a BRK-A too, but most can't afford a single share). The Omaha Oracle told Bloomberg TV, "Berkshire reduced its holding in ConocoPhillips and bought into some of the refining operation." Hey, you know what they say, if it's good enough for Warren, then it's good enough for me.
Clearly, Phillips 66 is off on the right foot as acknowledged by CEO Garland, "We're off to a solid start, running well in a positive margin environment. The location of our domestic refining, midstream and chemicals facilities enabled us to access advantaged feedstocks, creating strong earnings and cash flow. The announcement of our share repurchase plan is the evidence of our commitment to strong and growing shareholder distributions."
Off of Wednesday's earnings, Phillips 66 (PSX) closed at a new high. Investors would be wise to pay attention as when stocks with a limited trading history break into the open, there is no resistance above to hold shares back. There aren't any pre-drawn technical lines to cross before taking the next step. The sky is literally the limit on the stock chart. iStock believes the combination of muscular earnings, desire to return value to shareholders via rising dividends, and sensational $1 billion stock repurchase program will attract institutional and individual investors alike.
Right now, Phillips 66 is firing on all cylinders, and the time could be right to enjoy the ride.