Raymond James Lowers Marathon Price Target On Macro Headwinds, But Says Oil Refiner Well-Positioned
Marathon Petroleum Corp (NYSE: MPC) is facing refining headwinds, according to Raymond James.
The Analyst
Justin Jenkins maintained a Strong Buy rating on Marathon Petroleum and reduced the price target from $90 to $85.
The Thesis
Marathon Petroleum’s refining gross margins are now expected to be $12 per barrel in the first quarter versus the prior expectation of $12.50 per barrel, which is significantly lower than the $17.72 per barrel recorded in the fourth quarter, Jenkins said in a Wednesday note.
" ... We expect narrower crude differentials to present a headwind to margin capture," the analyst said, which Raymond James models at 95 percent of Marathon's refining margin indicator, down from an adjusted 107 percent in the fourth quarter.
The company’s retail segment is expected to witness rising commodity prices in the first quarter, Jenkins said. The fuel margin could decline by as much as 50 percent versus the fourth quarter to lower than 18 cents per gallon, he said.
Raymond James lowered its first-quarter EPS estimate from 35 cents to zero and reduced the EBITDA estimate from $1.95 billion to $1.6 billion.
The EPS estimates for 2019 and 2020 were lowered from $6 to $5.75 and from $9 to $8.50, respectively.
Although the first quarter is turning out to be a challenging one for refiners and there are near-term headwinds, Marathon Petroleum is well-positioned to benefit from “synergy upside and a strengthened refining suite, while robust opportunities in retail/midstream present further upside,” Jenkins said.
Price Action
Shares of Marathon Petroleum rose slightly to trade at $62.63 on Wednesday morning.
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Latest Ratings for MPC
Apr 2019 | Raymond James | Reiterates | Strong Buy | Strong Buy |
Mar 2019 | Citigroup | Maintains | Buy | Buy |
Feb 2019 | Macquarie | Initiates Coverage On | Outperform |
View More Analyst Ratings for MPC
View the Latest Analyst Ratings
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