Elliott Management has an approximately $1 billion investment in Phillips 66 and is pushing for at least two new board appointments as part of measures to "reassure investors that Phillips 66 is in the best possible position to achieve its value-creation potential," according to a letter the investment firm sent to PSX Wednesday.
The activist investor told the Phillips 66 board Wednesday it believes PSX is underperforming but that there is 75% of upside which could be realized if the company follows the changes proposed by Elliott Management.
"Phillips 66's performance has declined as it has shifted its focus away from its refining segment," Elliott wrote to the board, adding PSX has lagged behind peers Marathon Petroleum and Valero Energy.
"Over the past three years, as Phillips 66 has fallen further and further behind, its stock has meaningfully underperformed these peers," the activist investor added.
Phillips 66 stock jumped 3.6% to 122.25 Wednesday during market trade. PSX has gained more than 7% in November and has advanced 17% in 2023.
Elliott Outlines Concerns
Elliott Management sees PSX's increasing operating expense per barrel, the industry metric used to compare operating efficiency, as a major concern. In 2022, Phillips 66's per barrel operating expense gap to Valero grew to around $2.30, according to Elliott.
"We believe this lack of (operating expense) discipline has been a key driver of the company's stock-price underperformance," the firm wrote.
However, the activist investor added that Phillips 66 Chief Executive Mark Lashier's 2025 goals for the company are "correct" and that currently the CEO along with the management team "deserve investor support so long as they demonstrate meaningful progress against these targets."
Lashier has targeted $14 billion of midcycle EBITDA by 2025, with more than $1 billion in improvements generated from refining-segment operations along with other policies.
Phillips 66 Stock Performance
PSX shares have formed a flat base pattern and are currently just below a 125.19 buy point, according to MarketSmith analysis.
Phillips 66 stock is working on its third consecutive weekly advance and its sixth in the last eight weeks.
PSX has a 70 Composite Rating out of a best-possible 99.Phillips 66 stock also has an 85 Relative Strength Rating and a 15 EPS Rating.
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