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Ohio-based independent oil refiner and marketer Marathon Petroleum Corporation (MPC - Analyst Report) reported an impressive first quarter of 2013 backed by favorable market conditions and increased earnings in all its segments. These were partially offset by lower refining margins.

Marathon reported earnings per share of $2.17, in line with the Zacks Consensus Estimate.

Compared with the year-ago period, Marathon’s per share earnings improved considerably (from $1.70 to $2.17) – on the back of increased revenue and higher fuel margins in the Speedway segment.

Revenues at $23.3 billion were up 15.1% year over year and above the Zacks Consensus Estimate of $20.6 billion.

Segmental Performance

Refining & Marketing: Margins in the refining business decreased from the year-earlier levels.

Marathon’s refining and marketing unit earned $1.1 billion during the quarter, compared with $0.9 billion in the year-ago quarter – reflecting higher production and sales volume.
This was partially offset by lower realized gross refining and marketing margin that was down by 5.3% year over year to $7.92 per barrel. Total refined product sales volumes increased (by 22.7%) from the year-earlier level to 1,880 thousand barrels per day, while throughput improved 26.6% year over year to 1,671 thousand barrels per day.

Speedway: Income from the Speedway retail stations totaled $67 million, up from $50 million in the year-ago period. The growth was driven by increased gasoline and distillate gross margin as well as higher merchandise gross margin, partially offset by high expenses related to the increased number of stores.

Pipeline Transportation: Segment profitability for the most recent quarter was $51 million which increased 21.4% from the first quarter of 2012. Higher pipeline affiliate earnings and increased transportation tariffs aided the growth.

Capital Expenditure & Balance Sheet

During the quarter, Marathon spent $1.6 billion on capital programs (90.2% on Refining). As of Mar 31, 2013, the company had cash and cash equivalents of $4.7 billion and total debt of $3.4 billion, with a debt-to-capitalization ratio of 22%.

For its quarter ended Mar 31, Marathon returned about $547 million to shareholders by way of dividend and share repurchase programs.

Quarterly Dividend

On Apr 24, 2013, Marathon’s board of directors declared a quarterly common stock dividend of 35 cents per share ($1.40 per share annualized). The dividend will be paid on Jun 10, to shareholders of record as of May 16.

Zacks Rating

The company currently retains a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next 1 to 3 months.

In addition to Marathon, there are other oil refiners and marketers that are expected to perform well in the coming 1 to 3 months. These include Lehigh Gas Partners LP (LGP - Snapshot Report) with Zacks Rank #1 (Strong Buy), and Global Partners LP (GLP - Snapshot Report) and Inergy LP with Zacks Rank #2 (Buy).

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