Critical Review: Crestwood Equity Partners (CEQP) vs. Phillips 66 (PSX)

Crestwood Equity Partners (NYSE: CEQP) and Phillips 66 (NYSE:PSX) are both oils/energy companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, risk, earnings, dividends, valuation, profitability and analyst recommendations.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Crestwood Equity Partners and Phillips 66, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Crestwood Equity Partners 0 0 4 0 3.00
Phillips 66 2 5 8 0 2.40

Crestwood Equity Partners presently has a consensus target price of $27.75, suggesting a potential upside of 20.13%. Phillips 66 has a consensus target price of $92.22, suggesting a potential downside of 0.82%. Given Crestwood Equity Partners’ stronger consensus rating and higher possible upside, equities analysts clearly believe Crestwood Equity Partners is more favorable than Phillips 66.

Profitability

This table compares Crestwood Equity Partners and Phillips 66’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Crestwood Equity Partners -5.36% -3.34% -1.41%
Phillips 66 2.11% 7.58% 3.48%

Dividends

Crestwood Equity Partners pays an annual dividend of $2.40 per share and has a dividend yield of 10.4%. Phillips 66 pays an annual dividend of $2.80 per share and has a dividend yield of 3.0%. Crestwood Equity Partners pays out -85.1% of its earnings in the form of a dividend. Phillips 66 pays out 70.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Crestwood Equity Partners has raised its dividend for 5 consecutive years. Crestwood Equity Partners is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

63.9% of Crestwood Equity Partners shares are held by institutional investors. Comparatively, 69.8% of Phillips 66 shares are held by institutional investors. 36.2% of Crestwood Equity Partners shares are held by insiders. Comparatively, 0.5% of Phillips 66 shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Crestwood Equity Partners and Phillips 66’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Crestwood Equity Partners $2.52 billion 0.64 -$216.30 million ($2.82) -8.19
Phillips 66 $85.78 billion 0.55 $1.56 billion $3.99 23.31

Phillips 66 has higher revenue and earnings than Crestwood Equity Partners. Crestwood Equity Partners is trading at a lower price-to-earnings ratio than Phillips 66, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Crestwood Equity Partners has a beta of 2.75, meaning that its share price is 175% more volatile than the S&P 500. Comparatively, Phillips 66 has a beta of 1.2, meaning that its share price is 20% more volatile than the S&P 500.

Crestwood Equity Partners Company Profile

Crestwood Equity Partners LP is a holding company and a master limited partnership (MLP). The Company develops, acquires, owns or controls, and operates assets and operations within the energy midstream sector. The Company’s segments include gathering and processing (G&P), which includes its natural gas, crude oil and produced water G&P operations; storage and transportation, which includes its natural gas and crude oil storage and transportation operations, and marketing, supply and logistics, which includes its natural gas liquid (NGL) supply and logistics business, crude oil storage and rail loading facilities and fleet, and salt production business. The Company provides infrastructure solutions to service natural gas and crude oil shale plays across the United States. It owns and operates a portfolio of crude oil and natural gas gathering, processing, storage and transportation assets. Its operating assets are owned by or through its subsidiary, Crestwood Midstream Partners LP.

Phillips 66 Company Profile

Phillips 66 is an energy manufacturing and logistics company with midstream, chemicals, refining, and marketing and specialties businesses. The Company operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The Midstream segment gathers, processes, transports and markets natural gas, and transports, stores, fractionates and markets natural gas liquids (NGLs) in the United States. The Chemicals segment consists of its equity investment in Chevron Phillips Chemical Company LLC (CPChem), which manufactures and markets petrochemicals and plastics. The Refining segment buys, sells and refines crude oil and other feedstocks at refineries in the United States and Europe. The M&S segment purchases for resale and markets refined petroleum products, such as gasolines, distillates and aviation fuels, primarily in the United States and Europe, as well as includes the manufacturing and marketing of specialty products, and power generation operations.

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