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Why Is Marathon Petroleum (MPC) Up 6.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Marathon Petroleum (MPC). Shares have added about 6.1% 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 drivers.

Marathon Petroleum Posts Narrower-Than-Expected Q1 Loss

Independent oil refiner and marketer Marathon Petroleum reported adjusted loss of 20 cents per share, narrower than the Zacks Consensus Estimate of a loss of 72 cents. The company’s bottom line was favourably impacted by cost savings and stronger-than-expected performance from the Midstream segment. Precisely, operating income from the unit totaled $972 million, ahead of the Zacks Consensus Estimates of $929 million.

However, the bottom line compared unfavorably the year-earlier quarter's loss of 16 cents due to sharply lower refining margins.

Marathon Petroleum reported revenues of $22.9 billion that beat the Zacks Consensus Estimate of $15.8 billion and improved 9% year over year.

In an important quarterly development, Marathon Petroleum obtained approval from the Board of Directors to convert its Martinez petroleum refinery into a renewable diesel facility in response to the collapsing product demand. Further, the company notified that it expects the $21 billion-sale of its Speedway business to Japanese retail group Seven & i Holdings to conclude shortly.

Y/Y Segmental Performance

Refining & Marketing: The Refining & Marketing segment reported operating loss of $598 million, wider than the year-ago loss of $497 million. The deterioration reflects lower y/y margins.

Specifically, refining margin of $10.16 per barrel decreased from $11.86 a year ago. Total refined product sales volumes were 3,067 thousand barrels per day (mbpd), down from the 3,588 mbpd in the year-ago quarter. Moreover, throughput fell from 2,994 mbpd in the year-ago quarter to 2,565 mbpd though it beat the Zacks Consensus Estimate of 2,509 mbpd. Capacity utilization during the quarter was down from last year’s 91% to 83%.

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

Segment profitability was $972 million, 7.4% higher than the first quarter of 2020 and ahead of the Zacks Consensus Estimate of $929 million. Earnings were supported by stable, fee-based revenues and lower operating expenses.

Costs, Capex & Balance Sheet

Marathon Petroleum reported expenses of $22.7 billion in first-quarter 2021, down 31.6% from the year-ago quarter.

In the reported quarter, Marathon Petroleum spent $410 million on capital programs (33% on Refining & Marketing and 34% on the Midstream segment) compared to $1.1 billion in the year-ago period. As of Mar 31, the company had cash and cash equivalents of $758 million and a total debt, including that of MPLX, of $32.6 billion, with a debt-to-capitalization ratio of 53.4%.


How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted -6.12% due to these changes.

VGM Scores

Currently, Marathon Petroleum has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Marathon Petroleum has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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