We issued an updated research report on independent oil refiner and marketer Marathon Petroleum Corp.MPC on Jul 9, 2015.
While upstream energy firms continue to struggle in the weak crude pricing environment, refiners like Marathon are likely to reap benefits. This is reflected in Marathon Petroleum's current Zacks Rank #2 (Buy), which implies that the stock will outperform the broader U.S. equity market over the next one to three months.
Weak crude prices are good news for refiners as their input cost is reduced and hence, margins are improved. Recently, the commodity price encountered the steepest one-day fall since this February. The steep decline in crude price was mainly owing to a weakening Chinese economy and the probable flood of Iranian oil in an already over-supplied market. These factors are likely to continue to keep prices under pressure and hence, help refiners maintain positive free cash flow position.
A rise in refined product sales is also expected to drive earnings and revenue growth for the company in the coming months.
Marathon Petroleum continues to benefit from its seven refineries located in the Midwest and along the Gulf Coast. Also, the company's financial flexibility and strong balance sheet are real assets in this highly unstable economy. Furthermore, regular dividend payments and the ongoing share buyback program highlight the refiner's commitment to return more value to shareholders.
Stocks to Consider
Other stocks worth considering from the oil refining and marketing space are CVR Refining, LP CVRR , EnLink Midstream, LLC ENLC and HollyFrontier Corporation HFC . While CVR Refining and EnLink Midstream sport a Zacks Rank #1 (Strong Buy), HollyFrontier has a Zacks Rank as Marathon.
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