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Marathon Petroleum Q2 Earnings Beat on Higher Product Prices

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Ohio-based independent oil refiner and marketer, Marathon Petroleum Corp. (MPC - Free Report) reported strong second-quarter results, owing to higher product price realization and improved crack spread. The earnings strength has reflected in its share price on the NYSE, where it has risen more than 5% in early trade.

The company, in its current form, came into existence following the 2011 spin-off of Houston, TX-based Marathon Oil Corp’s (MRO - Free Report) refining/sales business into a separate, independent, publicly traded entity.

Marathon Petroleum reported earnings per share of $3.00 (excluding expenses related to pension settlement), surpassing the Zacks Consensus Estimate of $2.15 and the year-ago period adjusted profit of $2.00.

Moreover, revenues – at $26,933 million – beat the Zacks Consensus Estimate of $23,718 million. The top line also increased from the year-ago figure of $25,703 million.

Segmental Performance

Refining & Marketing: The unit earned $1,260 million during the quarter compared to profits of $903 million in the year-ago quarter.

Higher realization of product prices and increased crack spread in the U.S. Gulf Coast led to the improvement.

Total refined product sales volumes increased marginally from the year-earlier level to 2,145 thousand barrels per day, however throughput fell 1.7% year over year to 1,832 thousand barrels per day.

Speedway: Income from the Speedway retail stations totaled $94 million, down from $123 million in the year-ago period. Higher operating cost hampered the results. The negative comparison was also due to reduced distillate and gasoline gross margin during the quarter.

Pipeline Transportation: Segment profitability was $81 million, up from $58 million in the second quarter of 2013. Earnings were propped up by improved equity affiliate earnings.

Dividend Increase    

Yesterday, Marathon Petroleum reported its quarterly dividend of 50 cents per common share, reflecting a sequential hike of 19%. The increased dividend will likely be paid on Sep 10, 2014 to shareholders of record as of Aug 20.
Capital Expenditure, Balance Sheet & Share Repurchase

During the quarter, Marathon Petroleum spent $363 million on capital programs (64.7% on Refining & Marketing). As of Jun 30, 2014, the company had cash and cash equivalents of $2,125 million and total debt of $3,638 million, with a debt-to-capitalization ratio of 25%.

Yesterday, the company got approval from the board of directors to buyback another $2 billion worth shares through Jul 2016.

Moreover, during the reported quarter, Marathon Petroleum repurchased shares worth $459 million.  

Zacks Rank

Marathon Petroleum currently carries a Zacks Rank #3 (Hold), implying that it is expected perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the same industry like Eagle Rock Energy Partners L.P and Ferrellgas Partners LP (FGP - Free Report) . Both stocks sport a Zacks Rank #1 (Strong Buy).


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