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Ohio-based independent oil refiner and marketer Marathon Petroleum Corporation (MPC - Analyst Report) reported higher-than-expected second-quarter 2013 results, backed by excellent performances in the Speedway and Pipeline Transportation segments.

Marathon reported adjusted earnings per share of $1.95, above the Zacks Consensus Estimate of $1.91.

Marathon’s earnings per share however declined considerably from $2.53 to $1.95 on a year-over-year basis, owing to lower refining and marketing margins.

Revenues of $25.7 billion were up 26.9% year over year and above the Zacks Consensus Estimate of $24.6 billion.

Segmental Performance

Refining & Marketing: Marathon’s refining and marketing unit earned $0.9 billion during the quarter, compared with $1.3 billion in the year-ago quarter, owing to lower realized gross refining and marketing margin that was down 44.5% year over year to $6.18 per barrel.

Total refined product sales volumes increased (by 35.3%) from the year-earlier level to 2,125 thousand barrels per day, while throughput improved 39.2% year over year to 1,864 thousand barrels per day.

Speedway: Income from the Speedway retail stations totaled $123.0 million, up from $107.0 million in the year-ago period. The growth was driven by increased gasoline and distillate gross margin as well as higher merchandise gross margin, offset partially by high costs related to the increased number of stores.

Pipeline Transportation: Segment profitability for the most recent quarter was $58.0 million, which increased 16.0% from the second quarter of 2012. Higher revenues from transportation aided the results, offset partially by a hike in expenses related to operation and depreciation.

Capital Expenditure & Balance Sheet

During the quarter, Marathon spent $283.0 million on capital programs (47.4% on Refining). As of Jun 30, 2013, the company had cash and cash equivalents of $3.1 billion and total debt of $3.4 billion, with a debt-to-capitalization ratio of 22%.

Dividend & Share Repurchases

On Jul 31, 2013, Marathon’s board of directors declared a quarterly common stock dividend of 42 cents per share ($1.68 per share annualized) representing a sequential hike of 20%. The increased dividend will be paid on Sep 10, to shareholders of record as of Aug 21.

Moreover, for the reported quarter, Marathon returned about $1.0 billion to shareholders through dividends and share repurchases.

Zacks Rating

The company currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.

Meanwhile, stocks in the energy sector like Cheniere Energy Partners LP (CQP), SemGroup Corp. (SEMG - Snapshot Report) and Western Gas Partners LP (WES - Snapshot Report) are attractive investments. All the firms sport a Zacks Rank #2 (Buy).
 

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