How much a stock's price changes over time is a significant driver for most investors. Not only can price performance impact your portfolio, but it can help you compare investment results across sectors and industries as well.
Another thing that can drive investing is the fear of missing out, or FOMO. This particularly applies to tech giants and popular consumer-facing stocks.
What if you'd invested in Marathon Petroleum (
MPC Quick Quote MPC - Free Report) ten years ago? It may not have been easy to hold on to MPC for all that time, but if you did, how much would your investment be worth today? Marathon Petroleum's Business In-Depth
With that in mind, let's take a look at Marathon Petroleum's main business drivers.
Findlay, OH-based Marathon Petroleum Corporation is a leading independent refiner, transporter and marketer of petroleum products. The company, in its current form, came into existence following the 2011 spin-off of Houston, TX-based Marathon Oil Corporation’s refining/sales business into a separate, independent and publicly-traded entity. In October 2018, Marathon Oil completed the acquisition of its rival Andeavor in a $23.3 billion deal, thereby becoming the nationwide largest refining company by market capitalization. The deal also made the company the largest U.S. refiner and the fifth largest in the world by capacity.
Marathon Petroleum operates in two segments: Refining and Marketing and Pipeline Transportation.
Refining and Marketing: The unit’s operations include 16 refineries, located in the West Coast, Gulf Coast and the Mid-Continent regions of the United States, having a combined crude processing capacity of more than 3 million barrels per day. Additionally, Marathon Petroleum – through its marketing organization – sells transportation fuels, asphalt and specialty products throughout the country to support commercial, industrial and retail operations. In 2022, the Refining & Marketing segment recorded a profit of $16.4 billion.
Midstream: This unit mainly reflects Marathon Petroleum’s general partner and majority limited partner interests in MPLX LP and Andeavor Logistics LP - publicly-traded master limited partnerships that own and operate gathering and processing assets along with crude transportation and logistics infrastructure. Marathon Petroleum owns 63.6% each of MPLX’s and ANDX’s common units. The 'Midstream' segment reported total earnings of $4.5 billion in 2022.
In 2021, Marathon Petroleum sold its Speedway business to Japanese retail group Seven & i Holdings – owner of the 7-Eleven convenience store chain – for $21 billion. As of Dec 31, 2022, the company had cash and cash equivalents of $8.6 billion and a total debt, including that of MPLX, of $26.7 billion. Bottom Line
Putting together a successful investment portfolio takes a combination of research, patience, and a little bit of risk. For Marathon Petroleum, if you bought shares a decade ago, you're likely feeling really good about your investment today.
According to our calculations, a $1000 investment made in April 2013 would be worth $3,112.17, or a 211.22% gain, as of April 11, 2023. Investors should keep in mind that this return excludes dividends but includes price appreciation.
In comparison, the S&P 500 gained 158.80% and the price of gold went up 22.55% over the same time frame.
Going forward, analysts are expecting more upside for MPC.
Marathon Petroleum’s sale of its Speedway retail business for $21 billion provided the downstream operator with a much needed cash infusion. The deal also comes with a 15-year fuel supply agreement per which Marathon Petroleum will supply 7.7 billion gallons of gasoline per year to 7-Eleven, thus ensuring a steady revenue stream. But while refining fundamentals have certainly brightened from the covid lows, the sector is not out of the woods yet in terms of cash flows that remain anaemic and well below the pre-crisis levels. In particular, the weakness in business travel demand remains a complicating factor. The continued increase in costs and expenses over the past few quarters and execution risks related to renewables foray are other negatives in the Marathon Petroleum story. As such, the stock warrants a cautious stance.
Over the past four weeks, shares have rallied 6.03%, and there have been 7 higher earnings estimate revisions in the past two months for fiscal 2023 compared to none lower. The consensus estimate has moved up as well.