Ohio-based independent oil refiner and marketer
Marathon Petroleum Corporation
) reported slightly weaker-than-expected second quarter 2012
profits, hit by lower throughput and decreased pipeline
The company, in its current form, came into existence following
the 2011 spin-off of Houston, Texas-based
Marathon Oil Corporation
) refining/sales business into a separate, independent, publicly
Marathon Petroleum reported earnings per share (adjusted for
special items) of $2.53, a penny below the Zacks Consensus
MARATHON PETROL (MPC): Free Stock Analysis
MARATHON OIL CP (MRO): Free Stock Analysis
To read this article on Zacks.com click here.
However, compared with the year-ago period, Marathon Petroleum's
earnings per share improved by a handsome 10.5% - from $2.29 to
$2.53 - on the back of wider refining margins.
Revenues at $20,257.0 million were down 2.6% year over year but
managed to surpass the Zacks Consensus Estimate of $19,269.0
Refining & Marketing:
Margins in the refining business (in Chicago and U.S. Gulf Coast)
increased handsomely from the year-earlier levels. The situation
was further helped by wider sweet/sour differential.
Marathon Petroleum's refining and marketing unit earned $1,325.0
million during the quarter, compared to profits of $1,260.0 million
last year - reflecting higher margins and crack spreads.
The company's realized gross refining and marketing margin of
$11.13 per barrel was up from last year period's margin of $10.78
per barrel. Total refined product sales volumes improved marginally
(by 0.6%) from the year-earlier level to 1,571 thousand barrels per
day, while throughput was dipped 2.4% year over year to 1,339
thousand barrels per day.
Income from the Speedway retail stations totaled $107 million
during the quarter, up from $80 million in the year-ago period. The
positive comparison was driven by improved gasoline and distillate
gross margin, together with higher merchandise gross margin.
Same-store fuel sales increased 2.1% year over year.
Segment profitability for the most recent quarter was $50 million,
declining 7.4% from the second quarter of 2011, adversely affected
by lower pipeline affiliate earnings.
Capital Expenditure & Balance Sheet
During the quarter, Marathon Petroleum spent $481 million on
capital programs (37% on Refining & Marketing and 39% on
Speedway). As of June 30, 2012, the company had cash and cash
equivalents of $1,895.0 million and total debt of $3,335.0 million,
with a debt-to-capitalization ratio of 24%.
Recommendation & Rating
Spun out of parent Marathon Oil Co. in June 2011, Marathon
Petroleum is a leading refiner and marketer of petroleum products
in the U.S.
We have a long-term Outperform recommendation on the stock,
supported by a Zacks #2 Rank (short-term Buy rating). Our bullish
investment theme stems from Marathon Petroleum's scale advantage,
impressive asset quality, and an extensive midstream/retail network
that diversifies its portfolio and provides more stable revenue
We believe management's recently approved $2 billion share
repurchase program and potential formation of a midstream MLP could
further boost shareholder value. Marathon Petroleum's low debt
ratio and hefty cash balance add to the positive sentiment. These
factors, coupled with the relatively inexpensive valuation, make
the company an attractive investment.