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Things to Know Before Marathon Petroleum's (MPC) Q3 Earnings

Zacks Equity Research

Marathon Petroleum Corporation MPC is set to release third-quarter 2019 results before the opening bell on Thursday, Oct 31. The current Zacks Consensus Estimate for the to-be reported quarter is a profit of $1.30 on revenues of $31.5 billion.

The Zacks Consensus Estimate for third-quarter earnings has been revised downward 10.3% in the past 30 days. Given this backdrop, let’s delve into the factors that might have influenced the company’s performance in the September quarter.

Factors to Consider This Quarter

Marathon Petroleum’s third-quarter revenue results are likely to reflect synergies from last year's Andeavor acquisition.

Its retail division is expected to have benefited from higher year-over-year margins and sales due to Speedway and acquired retail assets of Andeavor. Notably, convenience stores, as of Sep 30, are likely to have totaled 3,913, higher than 2,745 at the end of third-quarter 2018. Moreover, the Zacks Consensus Estimate for merchandise sale and margins is pegged at a respective $1.7 billion and $479 million. The year-ago merchandise sale and margins figures were $1.3 billion and $384 million, respectively.

The Zacks Consensus Estimate for the Midstream segment profitability is pegged at $912 million for third-quarter 2019, indicating a rise from $679 million reported in the year-ago period, benefiting from stronger contributions from MPLX and Andeavor Logistics.

Finally, the Zacks Consensus Estimate for refined products sales volume and refinery throughput is pegged at 3,651 thousand barrels per day (mbpd) and 3,050 mbpd, suggesting a rise from the year-ago reported figures of 2,382 mbpd and 2,032 mbpd, respectively. Consequently, the Zacks Consensus Estimate for the company’s largest segment’s profitability is pegged at $708 million, suggesting a 6.3% rise from the year-ago quarter.

However, Marathon Petroleum’s bottom line is expected to reflect the impact of spiraling costs in the to-be-reported results. In the second quarter, total costs came in at $31.6 billion, up from the year-ago expenses of $20,734 million -- a trend that most likely continued in the third quarter because of higher operating costs.

What Does Our Model Say?

The proven Zacks model does not conclusively predict an earnings beat for Marathon Petroleum this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Marathon Petroleum has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.30.

Zacks Rank: Marathon Petroleum carries a Zacks Rank of 3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult for the stock this time around.

Highlights of Q2 Earnings & Surprise History

In the last reported quarter, the Findlay, OH-based company beat the consensus mark on better-than-expected contribution from the Refining & Marketing segment. Marathon Petroleum reported adjusted earnings per share of $1.73 that surpassed the Zacks Consensus Estimate by 40 cents. The downstream operator’s revenues of $33.7 billion outpaced the Zacks Consensus Estimate of $31.2 billion.

As far as earnings surprises are concerned, Marathon Petroleum is on a solid footing, having beaten the Zacks Consensus Estimate thrice in the last four reports. This is depicted in the graph below:

Marathon Petroleum Corporation Price and EPS Surprise

 

Marathon Petroleum Corporation Price and EPS Surprise

Marathon Petroleum Corporation price-eps-surprise | Marathon Petroleum Corporation Quote

Stocks to Consider

While an earnings beat looks uncertain for Marathon Petroleum, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this season:

Continental Resources, Inc. CLR has an Earnings ESP of +4.6% and is Zacks #3 Ranked. The company is scheduled to release earnings on Oct 30.

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

Gulfport Energy Corporation GPOR has an Earnings ESP of +3.57% and a Zacks Rank #3. The company is scheduled to release earnings on Oct 31.

Concho Resources, Inc. CXO has an Earnings ESP of +1.91% and is Zacks #3 Ranked. The company is scheduled to release earnings on Oct 29.

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