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Marathon's (MPC) Stock Is Soaring, But Is It Time to Buy?

Marathon Petroleum’s MPC stock has been in breakneck mode this year, notching up a series of all-time highs, as the refiner and marketer of crude oil has benefited from strength in the Energy space.

That being said, let's see if it's time to buy Marathon Petroleum’s stock, which has now climbed around 40% year to date to easily top the S&P 500 and the Zacks Oil and Gas - Refining & Marketing industry.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Higher Energy Prices Fuel the Rally

Obviously, the recent rise in oil prices has played a key role in MPC’s surge. That's a big boon for the company, given that it drives prices at the pumps.

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Oil prices rallied in the first quarter of 2024, with both Brent and West Texas Intermediate (“WTI”) crude futures registering significant increases. Brent oil, the global benchmark, rose nearly 14%, while WTI, which tracks U.S. crude, surged approximately 16% during the quarter. As of yesterday, the global benchmark settled at $89.89 per barrel, while U.S. crude closed at $85.06 a barrel.

Several factors contributed to the uptrend in oil prices, including the ongoing production cut by major oil-producing nations and geopolitical tensions.

Marathon Petroleum also benefited from the surge in gasoline prices, as U.S. refiners completed planned maintenance activities. As a result, domestic refinery utilization rates have remained below 90% for an extended period, marking the longest duration of such low utilization in three years.

Q1 Preview

Marathon Petroleum is set to report first-quarter 2024 earnings results on Apr 30 before the bell. The company has exceeded the earnings mark in each of the past four quarters, delivering an average earnings surprise of 24% over that timeframe. Given MPC’s positive track record, the question is, can it maintain the momentum?

The Zacks Earnings ESP indicates that Marathon Petroleum could surpass its bottom-line expectations, with the Most Accurate Estimate for Q1 EPS being $2.43 a share and 5.2% above the Zacks Consensus Estimate. On the flip side, MPC’s Q1 earnings are expected to slump 62.1% year over year to $2.31 per share, with sales projected to be down 10.9% to $31.3 billion.

Valuation & Annual Outlook

Marathon Petroleum shares are somewhat expensive on a relative basis, with the current 11.81X forward price-to-earnings ratio sitting above the 7.62X five-year median. It is also trading at a premium to the Zacks industry average of 9.50X. 

The company’s annual earnings are now expected to be down 25.8% in 2024 and drop another 16.7% in 2025 to $14.61 per share. Total sales are forecast to decline 14.8% this year, though it could be time for a marginal rebound next year, with revenues likely to edge up 0.8% to $129.1 billion.

Bottom Line

Marathon Petroleum has certainly asserted itself as one of the most important refining companies. Based on the factors discussed above, the company has landed a Zacks Rank #3 (Hold) at the moment. Agreed, the trend of earnings estimate revisions in the following weeks will play a large part in the potential for more upside in MPC’s stock. Make sure to keep an eye on the company’s refining margin, which fell 38% in the last quarter and could be down again in Q1. But this energy behemoth certainly deserves to be kept an eye on.

Energy Stocks to Buy

Investors interested in the energy sector might consider the operators mentioned below. These companies currently sport a Zacks Rank #1 (Strong Buy) each.

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

SM Energy Company SM: SM beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. SM Energy has a trailing four-quarter earnings surprise of 14.2%, on average.

SM is valued at around $5.9 billion. SM Energy has seen its shares increase 68.3% in a year.

Murphy USA (MUSA): The 2024 Zacks Consensus Estimate for MUSA indicates 3.6% year-over-year earnings per share growth.

Murphy USA is valued at around $8.6 billion. MUSA has seen its stock rise 52.8% in a year.

Global Partners LP GLP: Global Partners is valued at some $1.6 billion. The 2024 Zacks Consensus Estimate for GLP indicates 3.7% year-over-year earnings per unit growth.

Global Partners beat the Zacks Consensus Estimate for earnings in two of the trailing four quarters and missed in the other two, the average being 5.9%. GLP units have surged 48.3% in a year.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SM Energy Company (SM) : Free Stock Analysis Report

Murphy USA Inc. (MUSA) : Free Stock Analysis Report

Marathon Petroleum Corporation (MPC) : Free Stock Analysis Report

Global Partners LP (GLP) : Free Stock Analysis Report

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Zacks Investment Research