Critical Review: Phillips 66 (NYSE:PSX) versus Permian Basin Royalty Trust (NYSE:PBT)

Phillips 66 (NYSE:PSX) and Permian Basin Royalty Trust (NYSE:PBT) are both energy companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, analyst recommendations, valuation, profitability, dividends, institutional ownership and earnings.

Profitability

This table compares Phillips 66 and Permian Basin Royalty Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Phillips 66	4.54%	19.93%	7.62%
Permian Basin Royalty Trust	91.96%	9,990.08%	510.19%

Volatility & Risk

Phillips 66 has a beta of 0.71, suggesting that its stock price is 29% less volatile than the S&P 500. Comparatively, Permian Basin Royalty Trust has a beta of 0.56, suggesting that its stock price is 44% less volatile than the S&P 500.

Dividends

Phillips 66 pays an annual dividend of $5.08 per share and has a dividend yield of 1.7%. Permian Basin Royalty Trust pays an annual dividend of $0.24 per share and has a dividend yield of 0.7%. Phillips 66 pays out 28.9% of its earnings in the form of a dividend. Permian Basin Royalty Trust pays out 68.6% 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. Phillips 66 has raised its dividend for 14 consecutive years. Phillips 66 is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

76.9% of Phillips 66 shares are owned by institutional investors. Comparatively, 28.9% of Permian Basin Royalty Trust shares are owned by institutional investors. 0.4% of Phillips 66 shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares Phillips 66 and Permian Basin Royalty Trust”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Phillips 66	$136.56 billion	0.86	$4.40 billion	$17.55	16.72
Permian Basin Royalty Trust	$16.13 million	95.42	$14.30 million	$0.35	94.35

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

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Phillips 66 and Permian Basin Royalty Trust, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Phillips 66	0	7	11	2	2.75
Permian Basin Royalty Trust	0	1	0	0	2.00

Phillips 66 presently has a consensus price target of $266.88, suggesting a potential downside of 9.06%. Given Phillips 66’s stronger consensus rating and higher possible upside, analysts plainly believe Phillips 66 is more favorable than Permian Basin Royalty Trust.

Summary

Phillips 66 beats Permian Basin Royalty Trust on 13 of the 18 factors compared between the two stocks.

About Phillips 66

Phillips 66 operates as an energy manufacturing and logistics company in the United States, the United Kingdom, Germany, and internationally. It operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The Midstream segment transports crude oil and other feedstocks; delivers refined petroleum products to market; provides terminaling and storage services for crude oil and refined petroleum products; transports, stores, fractionates, exports, and markets natural gas liquids; provides other fee-based processing services; and gathers, processes, transports, and markets natural gas. The Chemicals segment produces and markets ethylene and other olefin products; aromatics and styrenics products, such as benzene, cyclohexane, styrene, and polystyrene; and various specialty chemical products, including organosulfur chemicals, solvents, catalysts, and chemicals used in drilling and mining. The Refining segment refines crude oil and other feedstocks into petroleum products, such as gasolines, distillates, aviation, and renewable. The M&S segment purchases for resale and markets refined petroleum products, including gasolines, distillates, and aviation fuels. This segment also manufactures and markets specialty products, such as base oils and lubricants. Phillips 66 was founded in 1875 and is headquartered in Houston, Texas.

About Permian Basin Royalty Trust

Permian Basin Royalty Trust, an express trust, holds royalty interests in various oil and gas properties in the United States. The company holds a 75% net overriding royalty interest in the Waddell Ranch properties, including Dune, Sand Hills (Judkins), Sand Hills (McKnight), Sand Hills (Tubb), University-Waddell (Devonian) and Waddell fields in Crane County, Texas. It also holds a 95% net overriding royalty in the Texas Royalty properties, which consist of various producing oil fields, such as Yates, Wasson, Sand Hills, East Texas, Kelly-Snyder, Panhandle Regular, N. Cowden, Todd, Keystone, Kermit, McElroy, Howard-Glasscock, Seminole, and others located in Texas. Its Texas Royalty properties comprise approximately 125 separate royalty interests containing approximately 51,000 net producing acres. The company was founded in 1980 and is based in Dallas, Texas.