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Ohio-based independent oil refiner and marketer Marathon Petroleum Corp. (MPC - Analyst Report) reported weak first quarter earnings, pulled down by higher turnaround costs and narrower crude differentials. It reflected in its share price on the NYSE, where it fell more than 2% in early trade.

The company, in its current form, came into existence following the 2011 spin-off of Houston, Texas-based Marathon Oil Corp’s (MRO - Analyst Report) refining/sales business into a separate, independent, publicly traded entity.

Marathon Petroleum reported earnings per share 67 cents, underperforming the Zacks Consensus Estimate of $1.05 and way below the year-ago period profit of $2.17.

However, revenues – at $23,345.0 million – were identical to last year and surpassed the Zacks Consensus Estimate of $23,261.0 million, backed by higher fuel sales volumes.

Segmental Performance

Refining & Marketing: Marathon Petroleum’s refining and marketing unit earned $362.0 million during the quarter, compared to profits of $1,105.0 million last year.

Profits in the refining business decreased significantly from the year-earlier levels, mainly due to narrower sweet/sour differentials. The situation was further compounded by spiraling turnaround expenses and lower refinery throughput on the back of maintenance activities. Partially offsetting these negatives were higher crack spreads and improved product price realizations.

Total refined product sales volumes increased (by 3.8%) from the year-earlier level to 1,951 thousand barrels per day, while throughput fell 1.3% year over year to 1,650 thousand barrels per day.

Speedway: Income from the Speedway retail stations totaled $58.0 million during the quarter, down from $67.0 million in the year-ago period. The negative comparison was due to unfavorable weather conditions in the Midwest, lower gasoline and distillate gross margin, together with higher operating expenses. This was partially offset by higher merchandise gross margin.

Pipeline Transportation: Segment profitability for the most recent quarter was $72.0 million, up from the $51.0 million achieved during the first quarter of 2013. Earnings were propped up by higher transportation revenue and equity affiliate income, somewhat negated by a rise in operating expenses.

Capital Expenditure, Balance Sheet & Share Repurchase

During the quarter, Marathon Petroleum spent $371.0 million on capital programs (48% on Refining & Marketing). As of Mar 31, 2014, the company had cash and cash equivalents of $2,166.0 million and total debt of $3,659.0 million, with a debt-to-capitalization ratio of 25%.

Moreover, for the reported quarter, Marathon Petroleum returned about $812.0 million to shareholders through dividends and share repurchases.

Zacks Rating

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

Some better-ranked stocks in the same sector include Phillips 66 Partners L.P. (PSXP - Snapshot Report) and NGL Energy Partners L.P. (NGL - Snapshot Report). While Phillips 66 Partners holds a Zacks Rank #1 (Strong Buy), NGL Energy Partners carries a Zacks Rank #2 (Buy).

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