Earnings for 2012 were $4.1 billion, or $6.48/share, versus $4.8 billion, or $7.52/share in 2011. While this may seem like a downfall, Phillips achieved 91% refining utilization (gross input divided by operable refining capacity of the unit), strengthened their balance sheet with $1 billion in debt reduction, returned over $400 million to shareholders through dividends and share repurchases, and announced intent to form a master limited partnership (MLP). Additionally, Phillips has goals to increase US export capability by nearly 30% from 285,000 to 370,000 barrels per day by the end of 2013.
In my opinion, Phillips 66 should definitely be on your watch list if you are considering an investment in an oil stock with some extra perks. First, Phillip’s Midstream segment has a 50% interest in DCP Midstream, LLC, one of the largest natural gas gatherers and processors in the US, with 7.2 billion cubic feet per day of gross natural gas processing capacity. In comparison, Exxon Mobil Corporation (NYSE:XOM), whose market cap is over 10x that of Phillips, had 4th quarter natural gas production of just 12.5 billion cubic feet per day. Second, Phillip’s is in the process of heavily expanding its shale operation to 200,000 barrels per day domestically in 2013 versus only 112,000 barrels per day in 2012.
Lastly, the MLP announcement should have income investors interested. Because of the advantages and purposes in place for MLPs, including income tax benefits and payouts similar to real estate investment trusts (REITs), many have dividend/distribution yields that exceed 5%. Whether you wait for the IPO of the Phillips MLP during the second half of 2013 or you get in on the stock now, you really can’t lose when it comes to yield. This is especially true since ConocoPhillips (NYSE:COP) has returned over 220% the past decade to investors, including its dividend, which has over tripled in that same time frame.
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Five Below Inc (NASDAQ:FIVE) is a specialty value retailer offering an assortment of products targeted towards teens and pre-teens priced at $5 and below. Since its IPO last July, the stock has already gone up nearly 34%, and based on 4th quarter guidance, it looks like the company is on target to hit analyst estimates with net sales of $169-$172 million with adjusted EPS of $0.36-$0.38. The company has been accelerating store openings with nearly 250 stores opened in 18 states, and it has been started to be one of the most important parts of their growth strategy.
I believe the company’s chase of growth alone will help levitate the stock on hopes and speculation in the coming years as they create more stores, expand into more states, and build the brand. Because of their low-cost business model and who they target, they have built many stores in the vicinity of Target Corporation (NYSE:TGT) and The Gap Inc. (NYSE:GPS)’s Old Navy stores. Old Navy currently makes up about 47% of net sales in its 1,013 U.S. region Old Navy locations under Gap. Being near Target looks more of a strategy of taking a percentage of food away from a big dog than the same percentage from a poodle. Overall, this means there is a lot of potential expansion if Five Below has goals of taking away market share from these retailer powerhouses.
