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Bull of the Day: Marathon Petroleum Corp. (MPC)

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Marathon Petroleum (MPC - Free Report) , a Zacks Rank #1 (Strong Buy), has been a substantial beneficiary of the energy surge this year. The stock has gone on to rally to new all-time highs while the general market continues to hover in bear territory. With inflation stubbornly lingering as we’ve seen over the past few months, MPC is set to continue its dominant trend.  

MPC sports the highest-possible ‘A’ rating in each of our Zacks Value, Growth, and Momentum Style Score categories, indicating an increased likelihood that the stock continues to propel higher. The powerful combination of relative undervaluation and positive earnings estimate revisions should serve bullish MPC investors well into the future.

Marathon Petroleum is a component of the Zacks Oil & Gas – Refining and Marketing industry, which currently ranks in the top 1% out of approximately 250 industry groups. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months. Also note the favorable characteristics for this group below:

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Quantitative research studies suggest that approximately half of a stock’s future price appreciation is due to its industry grouping. By targeting stocks contained within leading industry groups, we can dramatically improve our odds of success.

Company Description

Marathon Petroleum, headquartered in Findlay, Ohio, is engaged in refining, transporting and marketing of petroleum products. MPC also manufactures aromatics, propane, propylene, and sulfur. The company sells refined products to wholesale marketing customers in the United States and internationally.

MPC stores and distributes crude oil through pipelines, terminals, and barges. Furthermore, it gathers and transports natural gas liquids. Operating in 37 states, the District of Columbia, and Mexico, the energy giant was founded in 1887.

Recent Earnings and Future Estimates

MPC has been on a hot streak in terms of earnings surprises, beating estimates in each of the past four quarters – with an average beat of 56.68%. Back in August, the company reported Q2 EPS of $10.61/share, a +15.7% surprise over the $9.17 consensus estimate. When a company is consistently exceeding estimates by this wide of a margin, it typically creates a ‘tailwind’ and boosts price momentum.

Revenues for the second quarter of $54.2 billion also topped estimates by 63.08%. MPC has surpassed revenue estimates in each of the last four quarters.

In the past 60 days, analysts have raised their Q3 EPS projections by +9.02%. The Zacks Consensus EPS Estimate now stands at $6.89 per share, reflecting astounding growth of 843.84% relative to the same quarter last year.

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Charting the Course

MPC is up nearly 75% this year alone, widely outperforming the major indices. Only stocks that are in extremely powerful uptrends are able to weather bear markets and corrections so gracefully. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.

Zacks Investment Research
Image Source: Zacks Investment Research

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. And as we know, MPC has seen a recent batch of positive revisions. As long as this trend remains intact (and MPC continues to post earnings beats), the stock should continue its bullish run into next year.

Other Factors to Consider

Marathon Petroleum remains focused on enhancing shareholder value. The company currently pays a $2.23 (2.2%) dividend.

In addition, MPC repurchased $4.1 billion worth of shares during Q2 and has now completed more than 80% of its target to buy back $15 billion in common stock.

Bottom Line

As an established veteran in the industry, MPC trends remain favorable amid strength in the energy sector. Buoyed by an undervalued and leading industry group along with a maximum overall Zacks VGM score of ‘A’, it’s not difficult to see why MPC is a compelling investment.

A history of large earnings surprises along with a strong technical trend certainly warrant a closer look at this top-rated stock. Recent positive earnings estimate revisions should also serve to create a ‘floor’ in terms of any sudden or unexpected downside moves. If you’re looking for a way to diversify your portfolio, make sure to put MPC on your shortlist.


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