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Marathon Petroleum (MPC) Q4 Earnings Beat, Revenues Miss

Nilanjan Choudhury

Independent oil refiner and marketer Marathon Petroleum Corporation MPC reported strong fourth-quarter earnings on favorable crude differentials, growing throughput volumes and higher fuel margin.

The company’s adjusted earnings per share came in at $2.41, well ahead of the Zacks Consensus Estimate of $1.98 and the year-ago period's bottom-line figure of $1.05.

Marathon Petroleum’s revenues of $32.5 billion improved 53% year over year but came slightly below the Zacks Consensus Estimate of $33.2 billion.

Marathon Petroleum Corporation Price, Consensus and EPS Surprise

Marathon Petroleum Corporation Price, Consensus and EPS Surprise | Marathon Petroleum Corporation Quote

Segmental Performance

Refining & Marketing: Operating profit from the Refining & Marketing segment was $923 million compared with $732 million in the year-ago quarter. The improvement reflects wider crude differentials, in addition to rising throughputs following the 2018 acquisition of Andeavor

Total refined product sales volumes were 3,764 thousand barrels per day (mbpd), up from the 2,414 mbpd in the year-ago quarter. Moreover, throughput increased from 2,024 mbpd in the year-ago quarter to 3,111 mbpd.Capacity utilization during the quarter was 94%.

Retail: Income from the Retail segment totaled $613 million, up more than four-fold from the year-ago period. Apart from strong performance at Marathon Petroleum’s former Speedway unit, the segment results were buoyed by contribution from the acquired retail assets of Andeavor. Across the board, the Retail segment benefitted from higher fuel margins and merchandise sales. In particular, the company's retail fuel margin rose from 17.72 cents per gallon in the fourth quarter of 2017 to 32.35 cents per gallon in the quarter under review.

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

Segment profitability was $889 million, up from $343 million in the fourth quarter of 2017. Earnings were buoyed by the addition of Andeavor Logistics results that contributed $230 million during the quarter. The unit was further aided by the dropdown of refining logistics assets and fuels distribution services from sponsor Marathon Petroleum to MPLX. Finally, the unit benefited from strength in throughput volumes as well as record  gathered and processed volumes.

Total Expenses

Marathon Petroleum – which was spun off from Marathon Oil Corporation MRO in 2011 – reported expenses of $30.5 billion in fourth-quarter 2018, 52% higher than the year-ago quarter.

Capital Expenditure, Balance Sheet & Share Repurchase

In the reported quarter, Zacks Rank #3 (Hold) Marathon Petroleum spent $1.7 billion on capital programs (56% on the Midstream segment). As of Dec 31, the company had cash and cash equivalents of $1.7 billion and total debt of $27.5 billion, with a debt-to-capitalization ratio of 38.4%.

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

During the full year 2018, Marathon Petroleum returned $4.2 billion of capital to shareholders, including $675 million in share buybacks in the fourth quarter.

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