Marathon Petroleum Beats on Q4 Earnings, Revs - Analyst Blog

Ohio-based independent oil refiner and marketer Marathon Petroleum Corporation ( MPC ) reported better-than-expected fourth-quarter 2013 results. The impressive performance can be attributed to increased throughput volume at the Refining & Marketing business unit along with improved operating activities in the Speedway segment.

Marathon Petroleum reported earnings per share (adjusted for special items) of $2.10 in the fourth quarter of 2013, ahead of the Zacks Consensus Estimate of $1.16.

However, earnings decreased 7.1% from $2.26 reported in the year-ago period. A significant hike in total expenses led to the decline.

Revenues at $24.9 billion were up 20.4% year over year and surpassed the Zacks Consensus Estimate of $22.6 billion.

For the year ended Dec 31, 2013, Marathon reported per share adjusted profits of $6.81, above the Zacks Consensus Estimate of $5.91. However, the figure lagged the 2012 adjusted earnings of $9.80 per share.

Revenues of $100.3 billion were 21.5% above the prior year and also managed to beat the Zacks Consensus Estimate of $98.5 billion.

Segmental Performance

Refining & Marketing: Margins in the refining business decreased from the year-earlier levels. Marathon Petroleum's refining and marketing unit earned $971.0 million during the quarter, down from $1.1 billion in the year-ago period. Increased expenses owing to planned shutdown activities and relatively narrow crude oil differentials affected the results.

The company's realized gross refining and marketing margin of $15.69 per barrel was less than the year-ago period's margin of $16.34 per barrel. However, total refined product sales volumes increased (by 27.1%) from the year-earlier level to 2,143 thousand barrels per day, while throughput improved 23.9% year over year to 1,794 thousand barrels per day.

Speedway: Income from the Speedway retail stations totaled $83.0 million during the quarter, up from $77.0 million in the year-ago period. The improvement was driven by a better merchandise gross margin which was however partially offset by lower gross margins for distillate and gasoline.

Pipeline Transportation: Segment profitability for the quarter was $47.0 million which decreased 34.7% from the fourth quarter of 2012. Lower pipeline affiliate earnings and increased depreciation and operating cost hampered the result.

Total Expenses

Marathon Petroleum reported $23.9 billion of expenses in the fourth-quarter 2013, representing a significant hike of 22.5% as compared to the year-ago quarter.

Capital Expenditure & Balance Sheet

During the quarter, Marathon Petroleum spent $521.0 million on capital programs (57.0% on Refining). As of Dec 31, 2013, the company had cash and cash equivalents of $2.3 billion and total debt of $3.4 billion, with a debt-to-capitalization ratio of 23.0%.

For full-year 2013, Marathon Petroleum returned about $3.28 billion to shareholders through dividends and share repurchase programs.

Zacks Rating

Marathon Petroleum currently carries a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months. The company, in its current form, came into existence following the 2011 spin-off of Houston-based Marathon Oil Corp's ( MRO ) refining/sales business into a separate, independent and publicly traded entity.

One can also look at better-ranked players in the oil refining and marketing sector like CVR Energy Inc. ( CVI ) and NGL Energy Partners LP ( NGL ). Both the players sport a Zacks Rank #1 (Strong Buy).

CVR ENERGY INC (CVI): Free Stock Analysis Report

MARATHON PETROL (MPC): Free Stock Analysis Report

MARATHON OIL CP (MRO): Free Stock Analysis Report

NGL ENERGY PART (NGL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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