Phillips 66 (PSX Quick QuotePSX - Free Report) has surged 59.3% in the past year compared with the industry’s 18.4% improvement. 

What's Favoring the Stock?

PSX has a diversified business model, with a significant presence in businesses related to refining midstream, chemicals and marketing & specialties. In each of its operations, Phillips 66 has a solid footprint pertaining to safety, profitability, size and competitive strengths.

It is focusing more on businesses like midstream, renewables and chemicals, which makes the business model more stable. Having 72,000 miles of U.S. pipeline network, the company expects nearly 80% of its midstream contracts to be fee-based, signifying a stable business model with low sensitivity to commodity price fluctuations.

Phillips 66, carrying a Zacks Rank #3 (Hold), has a strong focus on returning capital to shareholders. Last year, the energy major returned more than 50% of its operating cashflows to investors, employing share repurchases and dividend payments.

Risks

Phillips 66’s refining business is exposed to extreme volatility in commodity prices since the end products are made with raw crude oil. Rising input costs hurt the company’s refining business. 

Stocks to Consider

Some better-ranked energy companies are Sunoco LP (SUN Quick QuoteSUN - Free Report) , Energy Transfer LP (ET Quick QuoteET - Free Report) and Murphy USA Inc. (MUSA Quick QuoteMUSA - Free Report) . All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.   

Sunoco, the leading independent fuel distributor in the United States, has a stable business model and relatively lower exposure to commodity price volatility. This is because the partnership distributes fuel to branded distributors under long-term contracts. 

With more than 125,000 miles of pipeline and associated energy assets, Energy Transfer will generate stable fee-based revenues. The partnership’s pipeline network spans all the key oil and natural gas resources across the United States.

Murphy USA is a renowned retailer of gasoline and convenience goods, distinguished by its adaptable business model that effectively enhances profitability during periods of economic expansion and recession.