Marathon Petroleum Corporation (MPC - Free Report) is set to release second-quarter 2020 results before the opening bell on Monday, Aug 3. The current Zacks Consensus Estimate for the to-be-reported quarter is a loss of $1.86 per share on revenues of $22.6 billion.
Let’s delve into the factors that might have influenced the downstream operator’s performance in the June quarter. But it’s worth taking a look at Marathon Petroleum’s previous-quarter performance first.
Highlights of Q1 Earnings & Surprise History
In the last reported quarter, the Findlay, OH-based refiner and marketer of petroleum products beat the consensus mark on strong performance by the Retail segment. Marathon Petroleum reported adjusted loss per share of 16 cents, 8 cents narrower than the Zacks Consensus Estimate. However, the company’s quarterly revenues of $24.1 billion missed the Zacks Consensus Estimate of $27.9 billion on account of lower-than-expected throughput.
As far as earnings surprises are concerned, Marathon Petroleum boasts an excellent record, having surpassed the Zacks Consensus Estimate in all the trailing four reports with an average beat of 43.08%. This is depicted in the graph below:
Trend in Estimate Revision
The Zacks Consensus Estimate for second-quarter bottom line has been revised 1.1% downward in the last 7 days. Moreover, the estimated figure indicates 207.51% deterioration year over year. The Zacks Consensus Estimate for revenues, meanwhile, is $22.6 billion, suggesting a 32.8% decline year over year.
Factors to Consider This Quarter
The economic disruption caused by the coronavirus outbreak and the associated demand destruction for refined products and transportation fuels on account of widespread travel restrictions is likely to have hurt the second-quarter earnings and cash flows of Marathon Petroleum. As proof of the weak business environment, the Zacks Consensus Estimate for the company’s key Refining and Marketing segment for the second quarter is pegged at a loss of $1.9 billion. A year ago, the unit had generated profit of $906 million.
However, as a counter to these negatives, Marathon Petroleum has also done a fairly admirable job at reducing costs. Marathon Petroleum’s cash outflows as capital expenditure continue to fall as it reins in spending levels. Further, the company aims to lower its planned annual operating expenses by $950 million. All this is expected to have pushed Marathon Petroleum’s second-quarter earnings and cash flows higher.
Moreover, Marathon Petroleum's $23.3 billion acquisition of Andeavor has integrated the premier assets of both the companies, bolstering the scale and leadership position of the combined entity in the United States. As it is, Marathon Petroleum is likely to have benefited from large differentials given its access to lower cost crude in the Permian, Bakken and Canada.
What Does Our Model Say?
The proven Zacks model does not conclusively show that Marathon Petroleum is likely to beat estimates in the second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company stands at 0.00%.
Zacks Rank: Marathon Petroleum has a Zacks Rank of 3.
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:
USA Compression Partners, LP (USAC - Free Report) has an Earnings ESP of +25% and a Zacks Rank #1. The firm is scheduled to release earnings on Aug 4.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bonanza Creek Energy, Inc. (BCEI - Free Report) has an Earnings ESP of +13.66% and is Zacks #1 Ranked. The firm is scheduled to release earnings on Aug 6.
NOW Inc. (DNOW - Free Report) has an Earnings ESP of +3.04% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Aug 5.
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