A month has gone by since the last earnings report for Marathon Petroleum (MPC). Shares have lost about 4.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Marathon Petroleum due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Marathon Petroleum Posts Better-Than-Expected Q3 Earnings
Independent oil refiner and marketer Marathon Petroleum reported adjusted earnings of 73 cents per share, which beat the Zacks Consensus Estimate of 72 cents. It had incurred a loss of $1.00 per share in the year-ago period.
The company’s bottom line was favorably impacted by stronger-than-expected performance from both segments. Precisely, operating income from the Refining & Marketing and the Midstream units totaled $509 million and $1 billion, respectively, ahead of their Zacks Consensus Estimate of $484 million and $984 million.
Marathon Petroleum reported revenues of $32.6 billion that beat the Zacks Consensus Estimate of $17.1 billion and improved 85.9% year over year.
The company repurchased shares worth $1.5 billion during the July-October period as part of its announcement to buy back $10 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.
Y/Y Segmental Performance
Refining & Marketing: The Refining & Marketing segment reported operating income of $509 million, turning around from the year-ago loss of $1.6 billion. The improvement primarily reflects higher y/y margins.
Specifically, refining margin of $14.51 per barrel increased from $8.28 a year ago. Total refined product sales volumes were 3,539 thousand barrels per day (mbpd), up from the 3,201 mbpd in the year-ago quarter. Throughput rose from 2,536 mbpd in the year-ago quarter to 2,836 mbpd and it beat the Zacks Consensus Estimate of 2,815 mbpd. Capacity utilization during the quarter was up from last year’s 84% to 93%.
Midstream: This unit mainly reflects Marathon Petroleum’s general partner and majority limited partner interests in MPLX LP – a publicly traded master limited partnerships that own, operate, develop and acquire pipelines and other midstream assets.
Segment profitability was $1 billion, 8.5% higher than the third quarter of 2020 and ahead of the Zacks Consensus Estimate of $984 million. Earnings were supported by stable, fee-based revenues and lower operating expenses.
Costs, Capex & Balance Sheet
Marathon Petroleum reported expenses of $31.3 billion in third-quarter 2021, surging 68.1% from the year-ago quarter.
In the reported quarter, Marathon Petroleum spent $464 million on capital programs (49% on Refining & Marketing and 41% on the Midstream segment) compared to $668 million in the year-ago period. As of Sep 30, the company had cash and cash equivalents of $5.9 billion and a total debt, including that of MPLX, of $27.3 billion, with a debt-to-capitalization of 43.9%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 119.32% due to these changes.
At this time, Marathon Petroleum has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Marathon Petroleum has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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