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Marathon (MPC) Q1 Earnings Beat on Surging Refining Margins

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·4 min read
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Independent oil refiner and marketer Marathon Petroleum Corporation MPC reported earnings per share of $1.49, which comfortably beat the Zacks Consensus Estimate of $1.12 and compared with a loss of 37 cents per share in the year-ago period. The company’s bottom line was favorably impacted by the stronger-than-expected performance of both segments. Precisely, operating income from the Refining & Marketing and the Midstream units totaled $768 million and $1.1 billion, respectively, ahead of their Zacks Consensus Estimates by 43.2% and 1.6%.

Marathon Petroleum reported revenues of $38.4 billion that beat the Zacks Consensus Estimate of $27.9 billion and improved 67.7% year over year.

The company repurchased shares worth $2.5 billion during the February-April period and has now completed around 80% of its target 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.

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

Refining Earnings Update

With the current conditions auguring well for the refining stocks, MPC follows peers Valero Energy VLO and Phillips 66 PSX in benefiting from favorable margins.

Phillips 66 reported adjusted earnings per share of $1.32, comfortably beating the Zacks Consensus Estimate of $1.14. The bottom line also turned around from a loss of $1.16 per share in the year-ago quarter.

PSX’s margins improved to $10.55 per barrel from the year-ago quarter’s $4.36. The same in the Central Corridor and Atlantic Basin/Europe increased to $7.89 and $11.71 per barrel from the year-ago levels of $5.97 and $4.86, respectively. In the Gulf Coast, the metric registered an improvement to $7.71 per barrel from $3.39 in the prior-year quarter. The West Coast witnessed an increase in margins from $3.33 per barrel in the year-ago quarter to $17.68 in the March-end quarter of 2022.

Another refining giant Valero Energy reported adjusted earnings of $2.31 per share, improving from a loss of $1.73 in the year-ago quarter. The bottom line also beat the Zacks Consensus Estimate of $1.61 per share. VLO’s strong quarterly results were supported by increased refinery throughput volumes and a higher refining margin.

For the quarter, refining throughput volumes were 2,800 thousand barrels per day (MBbls/d), up from 2,410 MBbls/d in first-quarter 2021. Meanwhile, Valero Energy’s refining margin per barrel of throughput increased to $12.74 from the year-ago level of $6.91.

Inside MPC’s Segments

Refining & Marketing: The Refining & Marketing segment reported operating income of $768 million, turning around from the year-ago loss of $598 million. The improvement primarily reflects higher year-over-year margins and throughputs.

Specifically, refining margin of $15.31 per barrel improved significantly from $10.16 a year ago. Total refined product sales volumes were 3,293 thousand barrels per day (mbpd), up from the 3,067 mbpd in the year-ago quarter. Throughput rose from 2,565 mbpd in the year-ago quarter to 2,833 mbpd but missed the Zacks Consensus Estimate of 2,846 mbpd. Capacity utilization during the quarter was up from last year’s 83% to 91%.

Midstream: This unit mainly reflects Marathon Petroleum’s general partner and majority limited partner interests in MPLX LP MPLX — a publicly traded master limited partnerships that own, operate, develop and acquire pipelines and other midstream assets.

Segment profitability was $1.1 billion, 10.3% higher than the first quarter of 2021. Earnings were supported by stable, fee-based revenues from MPLX’s wide range of midstream energy services.

Costs, Capex & Balance Sheet

Marathon Petroleum, carrying a Zacks Rank #2 (Buy), reported expenses of $36.7 billion in first-quarter 2022, rising 61.8% 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 $573 million on capital programs (43% on Refining & Marketing and 49% on the Midstream segment) compared to $410 million in the year-ago period. As of Mar 31, the company had cash and cash equivalents of $7.1 billion and total debt, including that of MPLX, of $26.7 billion, with a debt-to-capitalization of 46.8%.


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