Marathon (MPC) Stock Rises Since Q3 Earnings Beat: Here's Why

The stock of independent oil refiner and marketer, Marathon Petroleum Corporation MPC, has gained 2% since its third-quarter results were announced on Nov 1. The positive response could be attributed to the company’s comfortable earnings beat and its declaration of a dividend hike.

What Did Marathon Petroleum’s Earnings Unveil?

Marathon Petroleum reported adjusted earnings per share of $7.81, which comfortably beat the Zacks Consensus Estimate of $6.80 and compared with a profit of merely 73 cents per share in the year-ago period.

The company’s bottom line was favorably impacted by the stronger-than-expected performance of its Refining & Marketing segment. Operating income of the segment totaled $4.6 billion, ahead of its Zacks Consensus Estimate by 23.2%.

Marathon Petroleum reported revenues of $47.2 billion, which beat the Zacks Consensus Estimate of $35.7 billion and improved 44.8% year over year.

In October, the company completed its target to buy back $15 billion in common stock. This was after Marathon Petroleum concluded the sale of its Speedway business, comprising approximately 3,900 c-stores in 35 states to Japan-based retail group Seven &i Holdings — the owner of the 7-Eleven convenience store chain — for $21 billion. Currently, MPC has remaining authorization of $5 billion with no expiration date.

In more good news for investors, MPC’s board of directors declared a quarterly cash dividend of 75 cents per share to its common shareholders of record on Nov 16. The payout, which represents a 30% sequential increase, will be made on Dec 12.
 

Marathon Petroleum Corporation Price, Consensus and EPS Surprise

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

Inside MPC’s Segments

Refining & Marketing: The Refining & Marketing segment reported an operating income of $4.6 billion, which soared from the year-ago profit of just $509 million. The jump primarily reflects higher year-over-year margins and throughputs.

Specifically, the refining margin of $30.21 per barrel improved significantly from $14.51 a year ago. Total refined product sales volumes were 3,587 thousand barrels per day (mbpd), up from 3,539 mbpd in the year-ago quarter. Throughput rose from 2,836 mbpd in the year-ago quarter to 3,007 mbpd and beat the Zacks Consensus Estimate of 2,932 mbpd. Capacity utilization during the quarter was up from last year’s 93% to 98%.

Midstream: This unit mainly reflects Marathon Petroleum’s general partner and majority limited partner interests in MPLX LP — a publicly traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.

Segment profitability was $1.2 billion, 12.9% higher than in the third quarter of 2021. Earnings were supported by stable, fee-based revenues from MPLX’s wide range of midstream energy services.

Costs, Capex & Balance Sheet

Marathon Petroleum, carrying a Zacks Rank #1 (Strong Buy), reported expenses of $40.6 billion in third-quarter 2022, rising 29.7% from the year-ago quarter.

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

In the reported quarter, Marathon Petroleum spent $789 million on capital programs (56% on Refining & Marketing and 34% on the Midstream segment) compared to $464 million in the year-ago period. As of Sep 30, the company had cash and cash equivalents of $7.4 billion and total debt, including that of MPLX, of $26.7 billion, with a debt-to-capitalization of 44.9%.

Some Key Refining Earnings

While we have discussed MPC’s third-quarter results in detail, let’s see how some other refining companies fared this earnings season.

Phillips 66 PSX reported adjusted earnings per share of $6.46, comfortably beating the Zacks Consensus Estimate of $4.98. The bottom line also more than doubled from a profit of $3.18 per share in the year-ago quarter.

PSX’s worldwide margins surged to $26.58 per barrel from the year-ago quarter’s $8.57. The same in the Central Corridor and Atlantic Basin/Europe increased to $38.76 and $19.22 per barrel from the year-ago levels of $12.47 and $9.27, respectively. In the Gulf Coast, Phillips 66 saw the metric jump to $21.29 per barrel from $5.75 in the prior-year quarter. The West Coast witnessed an increase in margins from $7.46 per barrel in the year-ago quarter to $28.64 in the September-end quarter of 2022.

Another refining giant Valero Energy VLO reported adjusted earnings of $7.14 per share compared to a meager $1.22 in the year-ago quarter. The bottom line also beat the Zacks Consensus Estimate of $7 per share. VLO’s strong quarterly results were supported by increased refinery throughput volumes and a higher refining margin.

For the quarter, Valero’s refining throughput volumes were 3,005 thousand barrels per day (MBbls/d), up from 2,864 MBbls/d in third-quarter 2021. Meanwhile, VLO’s refining margin per barrel of throughput increased to $21.34 from the year-ago level of $10.07.

Then we have Murphy USA MUSA, whose third-quarter 2022 earnings per share of $9.28 handily beat the Zacks Consensus Estimate of $7.82 and improved significantly from the year-earlier bottom line of $3.98. MUSA’s outperformance could be attributed to a rise in the retail gasoline price and a higher retail margin of 37.6 cents per gallon, up 41.4% year over year.

Merchandise sales, at $1 billion, rose 7.7% year over year and outperformed the consensus mark of $983 million. However, Murphy USA’s revenues from petroleum product sales came in at $5.1 billion, falling 3.7% short of the Zacks Consensus Estimate but up 42.1% from the third quarter of 2021.

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