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Marathon (MPC) Q4 Earnings Top on Margin Gains, Buyback Raised

Independent oil refiner and marketer, Marathon Petroleum Corporation MPC reported adjusted earnings per share of $6.65, which comfortably beat the Zacks Consensus Estimate of $5.54 and compared with a profit of merely $1.30 per share in the year-ago period.

The company’s bottom line was favorably impacted by the stronger-than-expected performance of its key Refining & Marketing segment. Operating income of the segment totaled $3.9 billion, ahead of its Zacks Consensus Estimate by 38%.

Marathon Petroleum reported revenues of $40.1 billion, which beat the Zacks Consensus Estimate of $32 billion and improved 12.6% year over year.

In October 2022, the company completed its target of buying back $15 billion in common stock. This was after Marathon Petroleum concluded the sale of its Speedway business, comprising approximately 3,900 c-stores in 35 states to Japan-based retail group Seven &i Holdings — the owner of the 7-Eleven convenience store chain — for $21 billion.

In the fourth quarter, MPC repurchased $1.8 billion of shares and a further $700 million worth of shares this year till Jan 27. The company, which gave an additional $5 billion share repurchase approval, currently has a remaining authorization of $7.6 billion.

Marathon Petroleum plans to spend $1.3 billion in capital expenditure this year. Of this, some $360 million is earmarked for low-carbon opportunities.

Marathon Petroleum Corporation Price, Consensus and EPS Surprise

Marathon Petroleum Corporation Price, Consensus and EPS Surprise
Marathon Petroleum Corporation Price, Consensus and EPS Surprise

Marathon Petroleum Corporation price-consensus-eps-surprise-chart | Marathon Petroleum Corporation Quote

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Inside MPC’s Segments

Refining & Marketing: The Refining & Marketing segment reported an operating income of $3.9 billion, which soared from the year-ago profit of just $881 million. The jump primarily reflects higher year-over-year margins that more than offset lower throughputs and refined product sales.

Specifically, the refining margin of $28.82 per barrel improved significantly from $15.88 a year ago. Capacity utilization during the quarter was 94% — same as last year. However, total refined product sales volumes were 3,532 thousand barrels per day (mbpd), down from 3,600 mbpd in the year-ago quarter. Throughput also fell from 2,936 mbpd in the year-ago quarter to 2,895 mbpd and missed the Zacks Consensus Estimate of 2,926 mbpd.

Further, operating costs per barrel increased 4.9% year over year to $4.62. The cost escalation was blamed on higher energy-related outgo, more turnaround activity, as well as a special compensation expense.

Midstream: This unit mainly reflects Marathon Petroleum’s general partner and majority limited partner interests in MPLX LP MPLX — a publicly traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.

Segment profitability was $1.1 billion, edging up 1.7% from the fourth quarter of 2021. Earnings were supported by higher tariff rates and the stable, fee-based revenues from MPLX’s wide range of midstream energy services.

 

Costs, Capex & Balance Sheet

Marathon Petroleum, carrying a Zacks Rank #3 (Hold), reported expenses of $35.4 billion in fourth-quarter 2022, rising 4.5% from the year-ago quarter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

In the reported quarter, Marathon Petroleum spent $849 million on capital programs (59% on Refining & Marketing and 35% on the Midstream segment) compared to $651 million in the year-ago period. As of Dec 31, the company had cash and cash equivalents of $8.6 billion and total debt, including that of MPLX, of $26.7 billion, with a debt-to-capitalization of 43.9%.

Some Key Refining Earnings

While we have discussed MPC’s fourth-quarter results in detail, let’s see how some other refining companies have fared this earnings season.

Phillips 66 PSX reported adjusted earnings per share of $4, missing the Zacks Consensus Estimate of $4.34. However, the bottom line improved significantly from a profit of $2.94 per share in the year-ago quarter.

PSX’s worldwide margins improved to $19.73 per barrel from the year-ago quarter’s $11.95. The same in the Central Corridor and Atlantic Basin/Europe increased to $25.03 and $19.58 per barrel from the year-ago levels of $12.60 and $11, respectively. In the Gulf Coast, the metric registered an improvement to $16.35 per barrel from $10.16 in the prior-year quarter. The West Coast witnessed an increase in margins from $15.80 per barrel in the year-ago quarter to $16.77 in the December-end quarter of 2022.

But another refining giant, Valero Energy VLO, reported strong fourth-quarter earnings. The bottom line of $8.45 per share came in well above the Zacks Consensus Estimate of $7.45. The outperformance reflects increased refinery throughput volumes and a higher refining margin. In particular, adjusted operating income in the Refining unit amounted to $4.4 billion, surging from $1.1 billion in the year-ago quarter.

At the end of 2022, VLO had cash and cash equivalents of $4.9 billion, while the company’s total debt and finance lease obligations amounted to $11.4 billion. Valero’s fourth-quarter capital investment was $640 million. Of the total, $349 million was allotted for sustaining the business.

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