Opportunity at Marathon Petroleum

Shares of Marathon Petroleum Corporation ( MPC - Analyst Report ) hit a 52-week high of $65.37 on Wednesday, January 16. In fact, the Findlay, Ohio-based independent oil refiner and marketer – spun out of parent Marathon Oil Company ( MRO - Analyst Report ) in 2011 – has seen its stock price climb more than 20% since the beginning of November last year.

Despite this price appreciation, we remain optimistic on the firm’s near-term prospects, supported by consistency in its earnings/cash flows, attractive fundamentals and a positive outlook. These factors are reflected in Marathon Petroleum’s Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.

Why the Bullishness?

Our bullish investment theme stems from Marathon Petroleum’s scale advantage, impressive asset quality, and an extensive midstream/retail network that diversifies its portfolio and provides more stable revenue streams. We believe management’s recently commenced $2 billion share repurchase program and the proposed acquisition of BP Plc’s ( BP - Analyst Report ) Texas City refinery could further boost shareholder value. Marathon Petroleum’s low debt ratio and hefty cash balance add to the positive sentiment.

Based on solid expected performance from the company, eight out of 12 estimates for 2012 have moved higher in the past 60 days, pushing the Zacks Consensus Estimate up by 21 cents (or 2.2%) to $9.62. For 2013, six out of 12 estimates moved north in the past 60 days, helping the Zacks Consensus Estimate advance by 92 cents (or 10.9%) to $9.34.

Other Stocks to Consider

In addition to Marathon Petroleum, there are certain other downstream energy operators like Global Partners L.P. ( GLP - Snapshot Report ) , Northern Tier Energy L.P. ( NTI - Snapshot Report ) and CVR Energy Inc. ( CVI - Snapshot Report ) that offer even more value and are worth buying now. All these partnerships sport a Zacks Rank #1 (Strong Buy).