Phillips 66’s (PSX Quick QuotePSX - Free Report) shares have surged 23.2% in the past year compared with the industry’s 11.7% rise. 

What's Favoring the Stock?

PSX boasts a diversified business model, with substantial involvement in refining midstream, chemicals and marketing & specialties. Across all its operations, Phillips 66 maintains a strong presence in terms of safety, profitability, scale and competitive advantages.

The company is prioritizing segments such as midstream, renewables and chemicals, enhancing the stability of its business model. With a U.S. pipeline network spanning 72,000 miles, Phillips 66 anticipates that nearly 80% of its midstream contracts will be fee-based, indicating a resilient business model with minimal susceptibility to fluctuations in commodity prices.

Phillips 66, currently carrying a Zacks Rank #3 (Hold), has a strong focus on returning capital to shareholders. Since July 2022, the company has returned a massive $11.2 billion through both dividends and share repurchases. By the end of this year, it expects to meet its target of returning $13 billion to $15 billion to shareholders. You can see the complete list of today’s Zacks #1 Rank stocks here.    

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. Also, with new refinery capacities coming online, PSX will likely see a depressed refining margin in the coming quarters.

Some other companies that have refining businesses and are likely to get exposed to volatility in oil prices are Marathon Petroleum Corp. (MPC Quick QuoteMPC - Free Report) , Valero Energy Corporation (VLO Quick QuoteVLO - Free Report) and Exxon Mobil Corporation (XOM Quick QuoteXOM - Free Report) . 

Marathon Petroleum, with its extensive refining operations, manages the largest refining system in the United States. Valero Energy boasts a combined daily throughput capacity of roughly 3.2 million barrels, with its 15 refineries spreading across the United States, Canada and the U.K.

ExxonMobil also has a strong footing in the global refining business, having roughly 5 million barrels per day of distillation capacity across its 21 refineries.