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Can Marathon Petroleum (MPC) Pull a Surprise in Q2 Earnings?
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Independent oil refiner and marketer Marathon Petroleum Corp. (MPC - Free Report) is slated to release second-quarter 2018 results before the opening bell on Thursday, Jul 26. The current Zacks Consensus Estimate for the quarter under review is a profit of $1.98 on revenues of $20,280 million.
In the preceding three-month period, the company delivered a negative earnings surprise of 42.86% on lower fuel margin and declining income from its retail division. Specifically, refining margin of $10.58 per barrel decreased versus $11.65 a year ago.
As far as earnings surprises are concerned, the Findlay, OH-based downstream operator has a mixed history, having gone past the Zacks Consensus Estimate twice in the last four reports. This is depicted in the graph below:
Marathon Petroleum Corporation Price and EPS Surprise
Following last quarter’s miss, investors are keeping their fingers crossed and hoping that Marathon Petroleum surpasses earnings estimate this time. Their expectations are supported by the optimistic sentiment surrounding the stock, which has seen the Zacks Consensus Estimate for the second quarter move up 11.2% over the last 30 days.
However, our proprietary model is not sure of earnings beat this time around too. Let’s delve deep to find out the factors likely to impact Marathon Petroleum’s second-quarter results.
Factors to Consider This Quarter
We expect a bullish refining outlook to buoy the company’s bottom line in the second quarter of 2018. With crack spreads remaining elevated compared to where they were around a year ago, margin estimates have gone up. This is expected to improve financial and operational performance of the Refining & Marketing segment – the main contributor to Marathon Petroleum earnings.
Consequently, the Zacks Consensus Estimate for the refining segment’s bottom line stands at $631 million. This is significantly more than the year-ago operating income of $562 million and contrasts with the first-quarter operating loss of $133 million.
Meanwhile, Midstream segment profitability is expected to reach $602 million, up from $332 million in the second quarter of 2018. Earnings are likely to be buoyed by strength in volumes gathered, processed and fractionated.
However, Marathon Petroleum’s Speedway (or Retail) division is expected to see its income fall due to lower fuel margins. We note that the current Zacks Consensus Estimate for the quarterly income from operations is $217 million, below the $239 million reported in the year-ago quarter.
Rising expenses remain an issue as well. Marathon Petroleum, which is set to acquire Andeavor in a $23.3 billion deal, reported expenses of $18,544 million in the first quarter, 15.2% higher than the year-ago period. A continuation of the trend will adversely affect profitability.
What Does Our Model Say?
Our proven model too does not conclusively show that Marathon Petroleum will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
That is not the case here as you will see below.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for Marathon Petroleum stands at 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate both stand at $1.98.
Zacks Rank: Marathon Petroleum is #3 Ranked. Though a Zacks Rank of 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
While earnings beat looks uncertain for Marathon Petroleum, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
Anadarko Petroleum Corporation has an Earnings ESP of +6.65% and a Zacks Rank #2. The company is likely to release earnings on Jul 31.
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Can Marathon Petroleum (MPC) Pull a Surprise in Q2 Earnings?
Independent oil refiner and marketer Marathon Petroleum Corp. (MPC - Free Report) is slated to release second-quarter 2018 results before the opening bell on Thursday, Jul 26. The current Zacks Consensus Estimate for the quarter under review is a profit of $1.98 on revenues of $20,280 million.
In the preceding three-month period, the company delivered a negative earnings surprise of 42.86% on lower fuel margin and declining income from its retail division. Specifically, refining margin of $10.58 per barrel decreased versus $11.65 a year ago.
As far as earnings surprises are concerned, the Findlay, OH-based downstream operator has a mixed history, having gone past the Zacks Consensus Estimate twice in the last four reports. This is depicted in the graph below:
Marathon Petroleum Corporation Price and EPS Surprise
Marathon Petroleum Corporation Price and EPS Surprise | Marathon Petroleum Corporation Quote
Following last quarter’s miss, investors are keeping their fingers crossed and hoping that Marathon Petroleum surpasses earnings estimate this time. Their expectations are supported by the optimistic sentiment surrounding the stock, which has seen the Zacks Consensus Estimate for the second quarter move up 11.2% over the last 30 days.
However, our proprietary model is not sure of earnings beat this time around too. Let’s delve deep to find out the factors likely to impact Marathon Petroleum’s second-quarter results.
Factors to Consider This Quarter
We expect a bullish refining outlook to buoy the company’s bottom line in the second quarter of 2018. With crack spreads remaining elevated compared to where they were around a year ago, margin estimates have gone up. This is expected to improve financial and operational performance of the Refining & Marketing segment – the main contributor to Marathon Petroleum earnings.
Consequently, the Zacks Consensus Estimate for the refining segment’s bottom line stands at $631 million. This is significantly more than the year-ago operating income of $562 million and contrasts with the first-quarter operating loss of $133 million.
Meanwhile, Midstream segment profitability is expected to reach $602 million, up from $332 million in the second quarter of 2018. Earnings are likely to be buoyed by strength in volumes gathered, processed and fractionated.
However, Marathon Petroleum’s Speedway (or Retail) division is expected to see its income fall due to lower fuel margins. We note that the current Zacks Consensus Estimate for the quarterly income from operations is $217 million, below the $239 million reported in the year-ago quarter.
Rising expenses remain an issue as well. Marathon Petroleum, which is set to acquire Andeavor in a $23.3 billion deal, reported expenses of $18,544 million in the first quarter, 15.2% higher than the year-ago period. A continuation of the trend will adversely affect profitability.
What Does Our Model Say?
Our proven model too does not conclusively show that Marathon Petroleum will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
That is not the case here as you will see below.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for Marathon Petroleum stands at 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate both stand at $1.98.
Zacks Rank: Marathon Petroleum is #3 Ranked. Though a Zacks Rank of 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
While earnings beat looks uncertain for Marathon Petroleum, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
ConocoPhillips (COP - Free Report) has an Earnings ESP of +6.54% and a Zacks Rank #1. The firm is expected to release earnings on Jul 26. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Anadarko Petroleum Corporation has an Earnings ESP of +6.65% and a Zacks Rank #2. The company is likely to release earnings on Jul 31.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>