Still bullish on the energy sector? Marathon Petroleum MPC is a leading independent refiner, transporter, and marketer of petroleum products and is a Zacks Rank #1 (Strong Buy) stock.
Analysts are in near unanimous agreement in upgrading Marathon Petroleum’s earnings expectations, considerably improving its odds of a near-term rally. In addition to the near-term bullish catalysts, MPC has a very reasonable valuation and long-term macro tailwinds.
Marathon Petroleum is the largest petroleum refinery operator in the US and the fifth largest in the world. MPC has 16 refineries and over 3 million barrels a day of refining capacity.
Over the last year MPC stock has substantially outperformed the Oil Refining and Marketing industry, and the broad market, demonstrating its position as a preferred asset.
Q4 Beat, Buyback & Dividends
Marathon Petroleum posted a truly standout Q4 performance. Adjusted earnings per share of $6.65 handily beat analysts’ estimates of $5.54, a +20% surprise.
Sales beat expectations as well by a comfortable +25%. Marathon reported revenues of $40.1 billion, which beat the Zacks Consensus Estimate of $32 billion and showed 12.6% growth year over year.
Additionally Marathon Petroleum bought back $1.8 billion in shares in Q4 to bring the 2022 total buyback to $11.9 billion. The company returned $13.2 billion to shareholders in 2022, $1.3 billion of which was through dividends.
Marathon Petroleum dividend currently yields 2.3%. MPC has increased it’s dividend by an average of 7.7% annually over the last five years, and 29% in the last year alone.
Macro Tailwinds
MPC, along with the rest of the industry, is experiencing improved business fundamentals because of higher oil prices, which directly increase margins and profitability. As a reflection of this, Marathon Petroleum’s Refining & Marketing segment reported profit of $3.9 billion in Q4, soaring from the year-ago profit of just $881 million.
The underlying factors improving profitability don’t look to be abating either. Constrained supply and robust demand for oil products is still very much a reality. After oil prices broke below $70 per barrel a few weeks ago OPEC+ agreed to significantly reduce its daily oil production. This further tightened supply and pushed WTI oil prices back to $80 per barrel.
Additionally, while many investors came into 2023 expecting an economic slowdown and recession, which should slow demand for oil, it has yet to come to fruition. Surprising many, the most recent estimates for US GDP are still strong. According to the Atlanta Fed GDPNow, annual US GDP growth is estimated to be 2.5%.
The Chinese economy reopening has been yet another catalyst putting a floor underneath the price of oil.
Furthermore, there has been a gross underinvestment into energy infrastructure, particularly the oil and gas industry over the last decade. Because of ESG initiatives and a traumatic period of overinvestment in the early aughts there had been resistance to investing in the industry. But that investment gap is now rearing its ugly head as higher energy prices have boosted costs for industry and individuals.
While consumers are unhappy with the increased cost of energy, producers are in a good place, possibly for years to come.
Valuation
Marathon Petroleum is trading at a one-year forward earnings multiple of 6x, which is in line with the industry’s average and below its 10-year average of 11x. It is quite impressive to see MPC with such a reasonable valuation considering the stock is up 155% over the last two years. This means that earnings have kept up with, and even outpaced the stock appreciation.
Earnings Expectations
Although current quarter earnings revisions are mixed, future earnings periods are decisively bullish. Next quarter earnings have been revised 10% higher and FY23 earnings revisions have climbed 15%. The Zacks Earnings ESP is projecting an 11% earnings beat during the next reporting period.
Marathon Petroleum stock has a lot going for it today. Even after the tremendous run energy stocks have experienced over the last two years, analysts are still bullish on earnings and shares are still trading at reasonable valuations.
However, the risks still need to be noted. The primary risk for MPC would be a marked slowdown in economic activity. Constrained supply can only push oil prices so high, and if the economy goes into recession oil prices should drop, and so will Marathon’s profitability.
4 Oil Stocks with Massive Upsides
Global demand for oil is through the roof... and oil producers are struggling to keep up. So even though oil prices are well off their recent highs, you can expect big profits from the companies that supply the world with "black gold."
Zacks Investment Research has just released an urgent special report to help you bank on this trend.
In Oil Market on Fire, you'll discover 4 unexpected oil and gas stocks positioned for big gains in the coming weeks and months. You don't want to miss these recommendations.
Download your free report now to see them.
Still bullish on the energy sector? Marathon Petroleum MPC is a leading independent refiner, transporter, and marketer of petroleum products and is a Zacks Rank #1 (Strong Buy) stock.
Analysts are in near unanimous agreement in upgrading Marathon Petroleum’s earnings expectations, considerably improving its odds of a near-term rally. In addition to the near-term bullish catalysts, MPC has a very reasonable valuation and long-term macro tailwinds.
Marathon Petroleum is the largest petroleum refinery operator in the US and the fifth largest in the world. MPC has 16 refineries and over 3 million barrels a day of refining capacity.
Over the last year MPC stock has substantially outperformed the Oil Refining and Marketing industry, and the broad market, demonstrating its position as a preferred asset.
Q4 Beat, Buyback & Dividends
Marathon Petroleum posted a truly standout Q4 performance. Adjusted earnings per share of $6.65 handily beat analysts’ estimates of $5.54, a +20% surprise.
Sales beat expectations as well by a comfortable +25%. Marathon reported revenues of $40.1 billion, which beat the Zacks Consensus Estimate of $32 billion and showed 12.6% growth year over year.
Additionally Marathon Petroleum bought back $1.8 billion in shares in Q4 to bring the 2022 total buyback to $11.9 billion. The company returned $13.2 billion to shareholders in 2022, $1.3 billion of which was through dividends.
Marathon Petroleum dividend currently yields 2.3%. MPC has increased it’s dividend by an average of 7.7% annually over the last five years, and 29% in the last year alone.
Macro Tailwinds
MPC, along with the rest of the industry, is experiencing improved business fundamentals because of higher oil prices, which directly increase margins and profitability. As a reflection of this, Marathon Petroleum’s Refining & Marketing segment reported profit of $3.9 billion in Q4, soaring from the year-ago profit of just $881 million.
The underlying factors improving profitability don’t look to be abating either. Constrained supply and robust demand for oil products is still very much a reality. After oil prices broke below $70 per barrel a few weeks ago OPEC+ agreed to significantly reduce its daily oil production. This further tightened supply and pushed WTI oil prices back to $80 per barrel.
Additionally, while many investors came into 2023 expecting an economic slowdown and recession, which should slow demand for oil, it has yet to come to fruition. Surprising many, the most recent estimates for US GDP are still strong. According to the Atlanta Fed GDPNow, annual US GDP growth is estimated to be 2.5%.
The Chinese economy reopening has been yet another catalyst putting a floor underneath the price of oil.
Furthermore, there has been a gross underinvestment into energy infrastructure, particularly the oil and gas industry over the last decade. Because of ESG initiatives and a traumatic period of overinvestment in the early aughts there had been resistance to investing in the industry. But that investment gap is now rearing its ugly head as higher energy prices have boosted costs for industry and individuals.
While consumers are unhappy with the increased cost of energy, producers are in a good place, possibly for years to come.
Valuation
Marathon Petroleum is trading at a one-year forward earnings multiple of 6x, which is in line with the industry’s average and below its 10-year average of 11x. It is quite impressive to see MPC with such a reasonable valuation considering the stock is up 155% over the last two years. This means that earnings have kept up with, and even outpaced the stock appreciation.
Earnings Expectations
Although current quarter earnings revisions are mixed, future earnings periods are decisively bullish. Next quarter earnings have been revised 10% higher and FY23 earnings revisions have climbed 15%. The Zacks Earnings ESP is projecting an 11% earnings beat during the next reporting period.
Marathon Petroleum stock has a lot going for it today. Even after the tremendous run energy stocks have experienced over the last two years, analysts are still bullish on earnings and shares are still trading at reasonable valuations.
However, the risks still need to be noted. The primary risk for MPC would be a marked slowdown in economic activity. Constrained supply can only push oil prices so high, and if the economy goes into recession oil prices should drop, and so will Marathon’s profitability.
4 Oil Stocks with Massive Upsides
Global demand for oil is through the roof... and oil producers are struggling to keep up. So even though oil prices are well off their recent highs, you can expect big profits from the companies that supply the world with "black gold."
Zacks Investment Research has just released an urgent special report to help you bank on this trend.
In Oil Market on Fire, you'll discover 4 unexpected oil and gas stocks positioned for big gains in the coming weeks and months. You don't want to miss these recommendations.
Download your free report now to see them.
Get the latest research report on MPC - FREE