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Lower Margins Pull Down Marathon Petroleum (MPC) Q3 Earnings
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Ohio-based independent oil refiner and marketer Marathon Petroleum Corp. (MPC - Free Report) reported weaker-than-expected third-quarter earnings due to lower margins. The company reported earnings per share (excluding charges associated with the Sandpiper Pipeline project) of 58 cents, lower than the Zacks Consensus Estimate of 78 cents.
The bottom line also slumped from the year-ago period profit of $1.76.
Marathon Petroleum posted revenues of $16,460 million, missing the Zacks Consensus Estimate of $16,876.6 million. Moreover, revenues fell 12% on a year-over-year basis.
Segmental Performance
Refining & Marketing: The unit – which is the main contributor to Marathon Petroleum earnings – earned just $306 million compared with $1,434 million in the year-ago quarter. The deterioration reflects lower gross margin on the back of narrower crack spreads.
Total refined product sales volumes were 2,316 thousand barrels per day (mbpd), lower than 2,359 mbpd in the year-ago quarter. However, throughput improved from 1,912 mbpd in the year-ago quarter to 1,926 mbpd.
Speedway: Income from the Speedway retail stations totaled $209 million, 14% lower the $243 million earned in the year-ago period. Declining margins from light products in addition to higher depreciation, hampered the results. These were partly offset by higher
merchandise margin and light product sales volume.
Midstream: This unit includes Marathon Petroleum’s interest in MPLX L.P. (MPLX - Free Report) , a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets
Segment profitability was $258 million, up significantly from $93 million in the third quarter of 2015. Earnings were buoyed by operating results from the acquisition of natural gas processor and distributor MarkWest Energy Partners L.P. late last year. Contributions from new and existing pipelines and marine equity investments provided further support.
Marathon Petroleum reported expenses of $16,025 million in third-quarter 2016, 7% lower than $17,209 million in the year-ago quarter.
Capital Expenditure, Balance Sheet & Share Repurchase
In the reported quarter, Marathon Petroleum spent $761 million on capital programs (35% on Refining & Marketing segment and 52% on Midstream). As of Sep 30, 2016, the company had cash and cash equivalents of $709 million and total debt of $10,566 million, with a debt-to-capitalization ratio of 34%. Marathon Petroleum returned $241 million in the third quarter through dividends and share repurchase programs.
Strategic Actions
Concurrent with the earnings release, Marathon Petroleum also announced its plan to dropdown certain assets to its midstream partnership MPLX. These properties are expected to result in annual savings of $350 million by the end of next year.
Incorporated in 1959, Houston, TX-based McDermott International is an engineering and construction company, solely focused on the offshore oil and gas business. The company’s expected EPS growth rate for 3 to 5 years is currently 15.50% –– in contrast to the industry growth rate of -1.80%.
Headquartered in Calgary, Alberta, Precision Drilling supplies its customers in the oil and gas industry with drilling, completion and production services. It surpassed estimates in each of the last four quarters at an average rate of 41.51%.
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Lower Margins Pull Down Marathon Petroleum (MPC) Q3 Earnings
Ohio-based independent oil refiner and marketer Marathon Petroleum Corp. (MPC - Free Report) reported weaker-than-expected third-quarter earnings due to lower margins. The company reported earnings per share (excluding charges associated with the Sandpiper Pipeline project) of 58 cents, lower than the Zacks Consensus Estimate of 78 cents.
The bottom line also slumped from the year-ago period profit of $1.76.
Marathon Petroleum posted revenues of $16,460 million, missing the Zacks Consensus Estimate of $16,876.6 million. Moreover, revenues fell 12% on a year-over-year basis.
Segmental Performance
Refining & Marketing: The unit – which is the main contributor to Marathon Petroleum earnings – earned just $306 million compared with $1,434 million in the year-ago quarter. The deterioration reflects lower gross margin on the back of narrower crack spreads.
Total refined product sales volumes were 2,316 thousand barrels per day (mbpd), lower than 2,359 mbpd in the year-ago quarter. However, throughput improved from 1,912 mbpd in the year-ago quarter to 1,926 mbpd.
Speedway: Income from the Speedway retail stations totaled $209 million, 14% lower the $243 million earned in the year-ago period. Declining margins from light products in addition to higher depreciation, hampered the results. These were partly offset by higher
merchandise margin and light product sales volume.
Midstream: This unit includes Marathon Petroleum’s interest in MPLX L.P. (MPLX - Free Report) , a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets
Segment profitability was $258 million, up significantly from $93 million in the third quarter of 2015. Earnings were buoyed by operating results from the acquisition of natural gas processor and distributor MarkWest Energy Partners L.P. late last year. Contributions from new and existing pipelines and marine equity investments provided further support.
MARATHON PETROL Price, Consensus and EPS Surprise
MARATHON PETROL Price, Consensus and EPS Surprise | MARATHON PETROL Quote
Total Expenses
Marathon Petroleum reported expenses of $16,025 million in third-quarter 2016, 7% lower than $17,209 million in the year-ago quarter.
Capital Expenditure, Balance Sheet & Share Repurchase
In the reported quarter, Marathon Petroleum spent $761 million on capital programs (35% on Refining & Marketing segment and 52% on Midstream). As of Sep 30, 2016, the company had cash and cash equivalents of $709 million and total debt of $10,566 million, with a debt-to-capitalization ratio of 34%. Marathon Petroleum returned $241 million in the third quarter through dividends and share repurchase programs.
Strategic Actions
Concurrent with the earnings release, Marathon Petroleum also announced its plan to dropdown certain assets to its midstream partnership MPLX. These properties are expected to result in annual savings of $350 million by the end of next year.
Zacks Rank & Stock Picks
Marathon Petroleum holds a Zacks Rank #3 (Hold).
Meanwhile, one can look at better-ranked energy players like McDermott International Inc. and Precision Drilling Corp. (PDS - Free Report) . Both carry Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Incorporated in 1959, Houston, TX-based McDermott International is an engineering and construction company, solely focused on the offshore oil and gas business. The company’s expected EPS growth rate for 3 to 5 years is currently 15.50% –– in contrast to the industry growth rate of -1.80%.
Headquartered in Calgary, Alberta, Precision Drilling supplies its customers in the oil and gas industry with drilling, completion and production services. It surpassed estimates in each of the last four quarters at an average rate of 41.51%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>