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Energy companies are facing a double headwind: proposed tariffs that threaten to dampen demand, and an unexpected increase in OPEC production that could raise global supply and place additional downward pressure on oil prices.Although oil is not directly affected by tariffs, there are second-order effects of potential slower economic growth and reduced consumption. Oil refiners face a lower oil price environment which will compress refining margins.

The three largest refiners in the U.S. — Phillips 66 (PSX), Valero Energy (VLO), and Marathon Petroleum (MPC) — have all seen significant earnings downgrades from sell-side analysts, according to LSEG I/B/E/S.Using the ‘Screener’ app in LSEG Workspace, estimates for Phillips 66’s upcoming quarter (results due April 25) have been revised down by –166% over the past 30 days — the largest negative revision of any company in the S&P 500. Peers including Marathon have seen similarly sharp revisions (–138%, second largest), while Valero’s estimates have been cut by –49% (Exhibit 1).

As highlighted in our S&P 500 Q1 Earnings Season Preview, the energy sector is expected to report the lowest earnings growth rate in Q1 at -16.9%.To read the full preview, please visit: S&P 500 2025 Q1 Earnings Preview: A Clearing Event or More Uncertainty? Drilling down further, the Oil & Gas Refining & Marketing sub-industry is expected to post the lowest Q1 earnings growth in the entire sector (-101.8%) and a full-year 2025 earnings decline of -17.1%, also the lowest in the group.

Exhibit 1: Largest Negative Revisions to FQ1 Earnings Estimate (30d)

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Source: LSEG Workspace

In the image above, we show the StarMine SmartEstimate and the consensus estimate, along with the Predicted Surprise % (PS%), which measures the difference between the StarMine SmartEstimate (a weighted average that emphasizes timely and historically accurate analysts) and the consensus estimate. When PS% is greater than +2% or less than –2%, it correctly forecasts the direction of the earnings surprise approximately 70% of the time.

Throughout the rest of this note, we focus on Phillips 66, which has seen the largest estimate revision to date. However, we would observe a similar pattern from a StarMine perspective when analyzing Marathon Petroleum and Valero. Looking at the Detailed Estimates page in LSEG Workspace, Phillips 66 has a PS% of –108% (Exhibit 2).

The PS% is a valuable tool for investors looking to anticipate earnings surprises and avoid being caught off guard by unexpected misses or beats.  The last time Phillips 66 missed earnings was in Q1 2024, which triggered a 7-day post-earnings stock decline of –7.7%. (Exhibit 3).

Exhibit 2: StarMine Predicted Surprise for Phillips 66

Source: LSEG Workspace

Exhibit 3: Historical EPS Surprise – Phillips 66

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Source: LSEG Workspace

The Analyst Revision Model (ARM), which gauges analyst sentiment and is predictive of future analyst revisions.Exhibit 4 shows the ARM output for Phillips 66, which captures revisions for three-line items – Revenue, EBITDA, EPS – over three distinct time horizons: current quarter, current year, and next year.The model also incorporates a fourth component: the change in analyst recommendations.

Phillips 66 currently has a current ARM score of 2, placing it in the bottom decile in North America based on regional percentile ranking.The model also offers additional breakdowns by  country, sector, and industry to provide further granularity and comparability.

Exhibit 4: StarMine ARM Model – Phillips 66

Source: LSEG Workspace

Buy-side sentiment has also turned sour and is at the lowest level in three years, according to the StarMine Smart Holdings Model, where Phillips 66 has a model score of 6, again in the lowest decile. The StarMine Smart Holdings (SH) model assesses how a company is aligned to institutional investor preferences based on 25 fixed factors like volume, price momentum, profitability, value, growth, analyst revisions, and leverage.

The SH model is driven by two key components:

• Institutional Screening: evaluates whether a company aligns with current investor preferences.
• Change Component: identifies shifts in company fundamentals that could make it more appealing to portfolio managers. A high score suggests that the company is now more likely to appear on the radar of portfolio managers as they run their idea generation screens, making it a potential candidate for increased institutional accumulation.

Breaking down specific factors (Exhibit 5), Phillips 66 has seen deterioration in Leverage ratios, including Interest Coverage, Debt/Assets, and Debt/Equity.Analyst Revisions have seen a fall as already discussed and share prices have fallen which are captured in the Price Momentum category.  Amongst the more popular factors include EPS Trailing 5-year CAGR with a rank of 6, and has a score of 20 in this factor (higher scores are better).Within the Profitability category, Net Margin is sought after with a rank of 4 and Phillips 66 has a net profit margin of 1.5%.

Exhibit 5: StarMine Smart Holdings Model – Phillips 66

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Source: LSEG Workspace

If we take a closer look at the leverage ratios highlighted above, we find that Phillips 66 may be at risk of potential future downgrades to its credit rating. The StarMine Smart Ratios Credit Risk Model incorporates data from the balance sheet, income statement, and key performance indicators (KPIs) to assess the likelihood of future bankruptcy or default risk over a 12-month horizon. The model evaluates a range of metrics including profitability, leverage, coverage, liquidity, and growth & stability, using both trailing 12-month and forward 12-month ratios.

Phillips 66 currently holds a StarMine Implied Rating of BB-, which can be compared to traditional ratings from agencies such as S&P and Moody’s (see Exhibit 6). Empirical research shows that when the StarMine Implied Rating deviates significantly from agency ratings, there is a higher probability that agencies will revise their rating toward the implied level.

The BB- implied rating translates to a numerical probability of default (PD%) of 1.16% for Phillips 66. For context, a PD% above 1.7% would place a company in the top decile of default risk across the S&P 500, based on data as of April 11.

Exhibit 6: StarMine Smart Ratios Model – Phillips 66

Source: LSEG Workspace

As Q1 results approach, the combination of tariff risks, oil supply concerns, and analyst sentiment suggests a more cautious setup for the sector.To subscribe to the S&P 500 Earnings Scorecard – please visit here.

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