) share price dropped 1.6% to $84.94 on Jun 24, 2014 from the
previous day's closing price. This can be traced back to the
proposed acquisition of Spectrum Corp., a Memphis, TN-based
specialty lubricants company, which Phillips 66 announced on
Spectrum is an independent blender, packager and marketer of
specialty lubricants including two-cycle engine oil, small engine
oil and hydraulic oil. Spectrum offers a broad array of
private-label and brand-name specialty lubricants and related
products, including more than 500 products under 14 separate
product lines. Spectrum is currently owned by privately owned
Dominus Capital, L.P. The transaction is expected to close in the
third quarter of 2014 following the receipt of regulatory
Houston, TX based Phillips 66 is an independent publicly traded
company, formed after the spin-off of the refining/sales business
) in May 2012. The move resulted in the creation of the largest
refining company in the U.S. and the biggest exploration and
production player based on oil and gas reserves.
In addition to the refining, marketing and transportation
businesses, the company has emerged as an integrated downstream
company with most of the Midstream and Chemicals segments, as well
as power generation and certain technology operations included in
the Emerging Businesses segment.
Being a buyer of crude, the company's profitability might be
affected by the increase in
. As a result, with the commodity's price hovering around $106 per
barrel, we expect Phillips 66's margins to be negatively impacted
due to a rise in the cost of crude.
Phillips 66, one the largest independent oil refiners in the U.S.,
has easy access to the West Texas Intermediate (WTI) crude. WTI is
light and of very high quality. As the major portion of the
company's refining capacity uses light/sweet crude oil as
feedstock, the company is unable to take advantage of the
attractive crude quality spreads, which is the price differential
between the low-cost heavy/sour and the higher-priced light/sweet
grades of crude oil.
Both Phillips 66 and ConocoPhillips currently carry a Zacks Rank #3
(Hold). Some better-ranked stocks in the oil and gas sector include
Matrix Service Company
), both sporting a Zacks Rank #1 (Strong Buy).
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CONOCOPHILLIPS (COP): Free Stock Analysis
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