Marathon Petroleum (MPC) Up 2.5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Marathon Petroleum (MPC). Shares have added about 2.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Marathon Petroleum due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Marathon Petroleum Posts Better-Than-Expected Q2 Earnings
Independent oil refiner and marketer Marathon Petroleum reported second-quarter adjusted earnings of 67 cents per share, which beat the Zacks Consensus Estimate of 45 cents and compared with a loss of $1.33 per share in the year-ago period. The company’s bottom line was favourably impacted by stronger-than-expected performance from both segments. Precisely, operating income from the Refining & Marketing and the Midstream units totaled $224 million and $977 million, respectively, ahead of their Zacks Consensus Estimate of $145 million and $949 million.
Marathon Petroleum reported revenues of $29.8 billion that beat the Zacks Consensus Estimate of $17.3 billion and improved 142.5% year over year.
The company repurchased shares worth $1 billion during the second quarter 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 $224 million, turning around from the year-ago loss of $1.5 billion. The improvement reflects higher y/y margins.
Specifically, refining margin of $12.45 per barrel increased from $7.64 a year ago. Total refined product sales volumes were 3,489 thousand barrels per day (mbpd), up from the 2,878 mbpd in the year-ago quarter. Throughput rose from 2,276 mbpd in the year-ago quarter to 2,854 mbpd and it beat the Zacks Consensus Estimate of 2,774 mbpd. Capacity utilization during the quarter was up from last year’s 71% to 94%.
Midstream: This unit mainly reflects Marathon Petroleum’s general partner and majority limited partner interests in MPLX LP.
Segment profitability was $977 million, 12.4% higher than the second quarter of 2020 and ahead of the Zacks Consensus Estimate of $949 million. Earnings were supported by stable, fee-based revenues and lower operating expenses.
Costs, Capex & Balance Sheet
Marathon Petroleum reported expenses of $28.9 billion in second-quarter 2021, surging 146.2% from the year-ago quarter.
In the reported quarter, Marathon Petroleum spent $467 million on capital programs (38% each on Refining & Marketing and the Midstream segments) compared to $807 million in the year-ago period. As of Jun 30, the company had cash and cash equivalents of $11.8 billion and a total debt, including that of MPLX, of $28.3 billion, with a debt-to-capitalization of 44.2%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -7.27% due to these changes.
VGM Scores
At this time, Marathon Petroleum has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Marathon Petroleum has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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