Critical Analysis: Alliance Resource Partners (NASDAQ:ARLP) and Phillips 66 (NYSE:PSX)

Phillips 66 (NYSE:PSX) and Alliance Resource Partners (NASDAQ:ARLP) are both energy companies, but which is the superior business? We will compare the two businesses based on the strength of their valuation, profitability, earnings, dividends, institutional ownership, analyst recommendations and risk.

Dividends

Phillips 66 pays an annual dividend of $5.08 per share and has a dividend yield of 1.8%. Alliance Resource Partners pays an annual dividend of $2.40 per share and has a dividend yield of 9.6%. Phillips 66 pays out 28.9% of its earnings in the form of a dividend. Alliance Resource Partners pays out 117.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Phillips 66 has increased its dividend for 14 consecutive years.

Insider and Institutional Ownership

76.9% of Phillips 66 shares are owned by institutional investors. Comparatively, 18.1% of Alliance Resource Partners shares are owned by institutional investors. 0.4% of Phillips 66 shares are owned by insiders. Comparatively, 16.8% of Alliance Resource Partners shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Risk & Volatility

Phillips 66 has a beta of 0.71, indicating that its stock price is 29% less volatile than the S&P 500. Comparatively, Alliance Resource Partners has a beta of 0.34, indicating that its stock price is 66% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and target prices for Phillips 66 and Alliance Resource Partners, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Phillips 66	0	7	11	2	2.75
Alliance Resource Partners	0	1	2	0	2.67

Phillips 66 currently has a consensus target price of $256.31, indicating a potential downside of 9.20%. Given Phillips 66’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Phillips 66 is more favorable than Alliance Resource Partners.

Valuation and Earnings

This table compares Phillips 66 and Alliance Resource Partners”s gross 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	0.82	$4.40 billion	$17.55	16.08
Alliance Resource Partners	$2.17 billion	1.47	$311.16 million	$2.05	12.15

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

Profitability

This table compares Phillips 66 and Alliance Resource Partners’ 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%
Alliance Resource Partners	12.25%	17.70%	11.12%

Summary

Phillips 66 beats Alliance Resource Partners 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 Alliance Resource Partners

Alliance Resource Partners, L.P., a diversified natural resource company, produces and markets coal primarily to utilities and industrial users in the United States. The company operates through four segments: Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties, and Coal Royalties. It produces a range of thermal and metallurgical coal with sulfur and heat contents. The company operates seven underground mining complexes in Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia. In addition, it owns and leases oil and gas mineral interests and equity interests; and leases its coal mineral reserves and resources to its mining complexes; and leases land and operates a coal loading terminal on the Ohio River at Mt. Vernon, Indiana. Further, the company offers various mining technology products and services, including data network, communication and tracking systems, mining proximity detection systems, industrial collision avoidance systems, and data and analytics software. It also exports its products. The company was founded in 1971 and is headquartered in Tulsa, Oklahoma.