Phillips 66 (NYSE:PSX)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes showed a consistent upward trend over the five-year period. It increased steadily from 3,281 million US dollars in 2015 to 5,344 million US dollars in 2019, indicating an improvement in the company’s profitability and operational efficiency.

Cost of Capital

The cost of capital remained relatively stable, fluctuating slightly between 12.5% and 13.29%. The highest rate was observed in 2015 at 13.29%, with a gradual decrease to 12.5% by 2019. This slight decline suggests marginally lower financing costs or risk perceptions over time.

Invested Capital

Invested capital exhibited an overall growth trajectory. The amount rose from 42,469 million US dollars in 2015 to 50,827 million US dollars in 2019. Notably, there was a minor decrease in 2018 compared to 2017, but the invested capital rebounded in 2019 to its highest point in the observed period. This pattern reflects ongoing capital investments or asset base expansion with a slight short-term adjustment.

Economic Profit

Economic profit, representing the difference between NOPAT and the cost of capital applied to invested capital, remained negative throughout the period. However, the magnitude of the negative economic profit decreased from -2,364 million US dollars in 2015 to -1,007 million US dollars in 2019. This improvement indicates a gradual reduction in value destruction, suggesting that while the company did not fully cover its cost of capital, its economic performance was moving in a positive direction.

The financial data reveals distinct trends in net income and net operating profit after taxes (NOPAT) over the five-year period.

Net Income Attributable to Phillips 66

Net income experienced significant volatility throughout the period. Starting at US$4,227 million in 2015, net income decreased sharply to US$1,555 million in 2016, representing a notable decline. However, in the following years, net income rebounded strongly, rising to US$5,106 million in 2017 and further increasing to US$5,595 million in 2018. In 2019, net income declined again to US$3,076 million. This pattern indicates fluctuating profitability with considerable short-term variations.

Net Operating Profit After Taxes (NOPAT)

NOPAT shows a more consistent upward trend over the same period. Beginning at US$3,281 million in 2015, NOPAT increased steadily to US$4,480 million in 2016, US$4,664 million in 2017, US$5,129 million in 2018, and finally US$5,344 million in 2019. This gradual growth suggests improving core operational efficiency and profitability despite the fluctuations in net income.

In summary, while net income experienced notable fluctuations, particularly with a steep drop in 2016 followed by a peak in 2018, NOPAT demonstrated a steady and gradual improvement throughout the period. This contrast may indicate effects from non-operational factors influencing net income, whereas operating performance exhibited consistent enhancement.

The financial data reveals considerable fluctuations in both income tax expense (benefit) and cash operating taxes over the five-year period.

Income Tax Expense (Benefit)

There is a notable volatility in income tax expense figures, beginning with a high expense of 1,764 million USD in 2015, dropping sharply to 547 million USD in 2016. In 2017, the data shows a significant income tax benefit reflected by a negative value of -1,693 million USD. This is followed by a rebound to a positive expense of 1,572 million USD in 2018, before declining again to 801 million USD in 2019. This pattern indicates substantial variability, which could be due to changes in taxable income, tax rate adjustments, or extraordinary tax items within the company’s operational framework.

Cash Operating Taxes

The cash operating taxes also display considerable variation. The taxes paid almost drop from 1,407 million USD in 2015 to just 70 million USD in 2016, then rise to 363 million USD in 2017. A sharp increase occurs in 2018 to 1,429 million USD, followed by a decrease to 716 million USD in 2019. This trend, although somewhat aligned with the income tax expense, suggests fluctuating cash outflows related to tax operations, potentially reflecting changes in operational profitability, deferred tax payments, or differences between cash and accounting tax treatments.

Overall, the data suggests a highly dynamic tax position with considerable year-to-year changes. The negative income tax figure in 2017 particularly stands out as an anomaly, indicating either a tax benefit or adjustment that significantly reduced the tax expense for that year. The disparity between cash operating taxes and income tax expense in some years also implies timing differences between recorded tax expense and actual tax payments.

Total reported debt & leases

The total reported debt and leases show a continuous upward trend from 2015 through 2019. The value increased steadily each year from $10,643 million in 2015 to $13,024 million in 2019, indicating a rise in the company’s financial obligations over the period.

Stockholders’ equity

Stockholders' equity experienced fluctuations during the period. It decreased slightly from $23,100 million in 2015 to $22,390 million in 2016, then increased to a peak of $25,085 million in 2017. This was followed by a marginal decline in 2018 and a minor recovery in 2019, ending at $24,910 million. Overall, equity remained relatively stable with modest variations.

Invested capital

Invested capital showed a consistent growth trend over the five years. Beginning at $42,469 million in 2015, it rose each year and reached $50,827 million in 2019. This increase suggests ongoing capital investment and expansion activities.

Economic Profit

The economic profit shows a consistent negative trend throughout the analyzed period. Although the losses decreased from -2,364 million US dollars in 2015 to -1,007 million US dollars in 2019, the value remains negative, indicating that the company has not generated economic profit during these years. The improvement suggests a gradual reduction in economic losses, but the company still operates below the threshold of value creation.

Invested Capital

The invested capital displays a generally increasing trend from 42,469 million US dollars at the end of 2015 to 50,827 million US dollars in 2019. This upward movement indicates that the company has been augmenting its capital base over the period, which may reflect investments in assets, expansion, or acquisition activities. The increase is relatively steady with only a slight decline between 2017 and 2018.

Economic Spread Ratio

The economic spread ratio remains negative during the entire period, ranging from -5.57% in 2015 to -1.98% in 2019. The gradual increase towards zero implies an improving efficiency in generating returns above the cost of capital, but the ratio's persistence in negative territory confirms that the returns on invested capital have not surpassed the cost of capital. This gradual improvement aligns with the reduction in economic losses noted.

Sales and Other Operating Revenues

Over the five-year period, sales and other operating revenues exhibited fluctuations. The value decreased from approximately 98.98 billion US dollars in 2015 to 84.28 billion in 2016, indicating a significant decline. Subsequently, revenues increased notably to 102.35 billion in 2017 and continued to rise to 111.46 billion in 2018. However, there was a slight decrease in 2019, with revenues falling to 107.29 billion. Overall, the trend shows recovery after an initial drop, followed by relative stabilization slightly below the peak in 2018.

Economic Profit

The economic profit remained negative throughout the period, indicating that the company's returns did not exceed its cost of capital. The loss lessened progressively from -2.36 billion US dollars in 2015 to -1.01 billion in 2019. This improvement in economic profit suggests gradual enhancement in profitability and operational efficiency, albeit without achieving positive economic profit. The largest improvement occurred between 2015 and 2016, with further consistent but smaller reductions in losses in subsequent years.

Economic Profit Margin

This margin, expressed as a percentage of revenues, also improved steadily from -2.39% in 2015 to -0.94% in 2019. This aligns with the trend observed in economic profit, reflecting enhanced operational performance and profitability relative to sales. Despite this improvement, the negative margin underscores persistent challenges in generating returns above the cost of capital, though the narrowing margin indicates progress toward financial health.