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Marathon (MPC) Q3 Loss Narrower Than Expected, Sales Miss

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Zacks Equity Research
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Independent oil refiner and marketer Marathon Petroleum Corporation MPC reported adjusted loss of $1 per share, narrower than the Zacks Consensus Estimate of a loss of $1.63. The company’s bottom line was favorably impacted by strong-than-expected performance from both the segments. Operating income from the Refining & Marketing and Midstream units totaled a loss of $1.6 billion and profit of $960 million, ahead of the respective Zacks Consensus Estimates of a loss of $2 billion and a profit of $888 million, respectively.

However, the bottom line compared unfavorably the year-earlier quarter's earnings of $1.63 due to sharply lower refining margins.

Marathon Petroleum reported revenues of $17.5 billion that missed the Zacks Consensus Estimate of $19.9 billion and declined 36.6% year over year.

Forced by the historic oil market crash and the coronavirus-induced demand destruction for the fuel, Marathon Petroleum has already announced a cut to its 2020 capital spending plan by $1.4 billion, or 30%, to $3 billion. The company is also targeting a reduction in its operating expenses to $950 million. Marathon Petroleum said that it is on track to surpass both objectives.

Marathon Petroleum, which has applied for permits for the conversion of its Martinez petroleum refinery into a renewable diesel facility in response to the collapsing product demand, expects the sale of its Speedway business to Japanese retail group Seven & i Holdings to conclude by Mar 31, 2021

 

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

 

Y/Y Segmental Performance

Refining & Marketing: The Refining & Marketing segment reported operating loss of $1.6 million, as against income of $989 million in the year-ago quarter. The deterioration reflects lower y/y margins.

Specifically, refining margin of $8.28 per barrel decreased significantly versus $15.11 a year ago. Total refined product sales volumes were 3,201 thousand barrels per day (mbpd), down from the 3,706 mbpd in the year-ago quarter. Moreover, throughput fell from 3,156 mbpd in the year-ago quarter to 2,536 mbpd though it beat the Zacks Consensus Estimate of 2,378 mbpd. Capacity utilization during the quarter was down 14% year over year to 84%.

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 $960 million, 4.5% higher than the third quarter of 2019. Earnings were supported by table, fee-based revenues, lower operating expenses, plus contribution from organic growth projects.

Costs, Capex & Balance Sheet

Marathon Petroleum reported expenses of $18.6 billion in third-quarter 2020, down 28.5% from the year-ago quarter.

In the reported quarter, Marathon Petroleum spent $668 million on capital programs (38% on Refining & Marketing and 45% on the Midstream segment) compared to $1.6 billion in the year-ago period. As of Sep 30, the company had cash and cash equivalents of $716 million and a total debt of $32 billion, with a debt-to-capitalization ratio of 52.1%.

Zacks Rank & Stock Picks

Marathon Petroleum holds a Zacks Rank #4 (Sell).

Some better-ranked players in the energy space are Cabot Oil & Gas Corporation COG and Holly Energy Partners, L.P. HEP that sport a Zacks Rank #2 (Buy).

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

Over 30 days, Cabot Oil & Gas has seen the Zacks Consensus Estimate for 2020 improve 6.9%.  

Over 30 days, Holly Energy Partners has seen the Zacks Consensus Estimate for 2020 improve 1.1%

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