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Marathon (MPC) Q2 Earnings Top Despite a Plunge in Margins
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Independent oil refiner and marketer Marathon Petroleum Corporation (MPC - Free Report) reported adjusted earnings per share of $5.32, which comfortably beat the Zacks Consensus Estimate of $4.55 on the back of lower costs and expenses.
However, the company’s bottom line fell from the year-ago adjusted profit of $10.61 due to weaker-than-expected performance of its key Refining & Marketing segment. Operating income of the segment totaled $2.3 billion, below our projection of $2.8 billion.
Marathon Petroleum reported revenues of $36.8 billion, which beat the Zacks Consensus Estimate of $31 billion but declined 32.1% year over year.
Marathon Petroleum Corporation Price, Consensus and EPS Surprise
Refining & Marketing: The Refining & Marketing segment reported an operating income of $2.3 billion, which plunged from the year-ago profit of $7.1 billion. The decline primarily reflects lower year-over-year margins and refined product sales to go with a decrease in capacity utilization.
Specifically, the refining margin of $22.10 per barrel compared to $37.54 a year ago though it came ahead of our estimate of $17.98. Capacity utilization during the quarter was 93%, down from 100% in the corresponding period of 2022. We expected the metric to be 91.3%. The year-over-year tick-down reflects planned maintenance activity in the Mid-Continent and West Coast regions.
Meanwhile, total refined product sales volumes were 3,581 thousand barrels per day (mbpd), down from 3,615 mbpd in the year-ago quarter and our estimate of 3,630.2 mbpd. Throughput also fell from 3,069 mbpd in the year-ago quarter to 2,925 mbpd but outperformed our estimate of 2,860 mbpd.
MPC’s operating costs per barrel edged down from $5.19 in the year-ago quarter to $5.15. The company managed to reign in expenses due to lower energy outgo and disciplined execution. Our estimates factored in a higher unit cost of $5.20.
Midstream: This unit mainly reflects Marathon Petroleum’s general partner and majority limited partner interests in MPLX LP (MPLX - Free Report) — a publicly traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.
Segment profitability was $1.2 billion, up 6.7% from the second quarter of 2022. Earnings were supported by higher tariff rates and the stable, fee-based revenues from MPLX’s wide range of midstream energy services.
Financial Analysis
Marathon Petroleum, carrying a Zacks Rank #3 (Hold), reported expenses of $33.5 billion in second-quarter 2023, falling 27% from the year-ago quarter but coming above our projection of $24.5 billion.
In the reported quarter, Marathon Petroleum spent $562 million on capital programs (43% on Refining & Marketing and 48% on the Midstream segment) compared to $577 million in the year-ago period. As of Jun 30, the company had cash and cash equivalents of $7.3 billion and total debt, including that of MPLX, of $27.3 billion, with a debt-to-capitalization of 46.3%.
In the second quarter, MPC repurchased $3.1 billion of shares and a further $800 million worth of shares in July. The company currently has a remaining authorization of $6.3 billion.
Some Key Refining Earnings
While we have discussed MPC’s second-quarter results in detail, let’s see how some other refining companies have fared this earnings season.
Phillips 66 (PSX - Free Report) reported adjusted earnings per share of $3.87, beating the Zacks Consensus Estimate of $3.54. The outperformance can be primarily attributed to lower expenses. The positives were partially offset by PSX’s declining refining margins worldwide.
For the reported quarter, Phillips 66 generated $955 million of net cash from operations, down from $1.8 billion a year ago. PSX’s capital expenditure and investments totaled $551 million. It paid out dividends of $474 million in the reported quarter. As of Jun 30, 2023, cash and cash equivalents were $3 billion. Meanwhile, Phillips 66 reported total debt of $19.9 billion, reflecting a consolidated debt to capitalization of 39%.
Another refining giant, Valero Energy (VLO - Free Report) , also reported better-than-expected second-quarter earnings. The EPS of $5.40 per share came in well above the Zacks Consensus Estimate of $5.08. This was on account of VLO’s increased renewable diesel sales volumes and a decline in total costs of sales.
At the end of the second quarter, VLO had cash and cash equivalents of $5.1 billion, while the company’s total debt and finance lease obligations amounted to $11.3 billion. Valero’s second-quarter capital investment was $458 million. Of the total, $382 million was allotted for sustaining the business.
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Marathon (MPC) Q2 Earnings Top Despite a Plunge in Margins
Independent oil refiner and marketer Marathon Petroleum Corporation (MPC - Free Report) reported adjusted earnings per share of $5.32, which comfortably beat the Zacks Consensus Estimate of $4.55 on the back of lower costs and expenses.
However, the company’s bottom line fell from the year-ago adjusted profit of $10.61 due to weaker-than-expected performance of its key Refining & Marketing segment. Operating income of the segment totaled $2.3 billion, below our projection of $2.8 billion.
Marathon Petroleum reported revenues of $36.8 billion, which beat the Zacks Consensus Estimate of $31 billion but declined 32.1% year over year.
Marathon Petroleum Corporation Price, Consensus and EPS Surprise
Marathon Petroleum Corporation price-consensus-eps-surprise-chart | Marathon Petroleum Corporation Quote
Inside MPC’s Segments
Refining & Marketing: The Refining & Marketing segment reported an operating income of $2.3 billion, which plunged from the year-ago profit of $7.1 billion. The decline primarily reflects lower year-over-year margins and refined product sales to go with a decrease in capacity utilization.
Specifically, the refining margin of $22.10 per barrel compared to $37.54 a year ago though it came ahead of our estimate of $17.98. Capacity utilization during the quarter was 93%, down from 100% in the corresponding period of 2022. We expected the metric to be 91.3%. The year-over-year tick-down reflects planned maintenance activity in the Mid-Continent and West Coast regions.
Meanwhile, total refined product sales volumes were 3,581 thousand barrels per day (mbpd), down from 3,615 mbpd in the year-ago quarter and our estimate of 3,630.2 mbpd. Throughput also fell from 3,069 mbpd in the year-ago quarter to 2,925 mbpd but outperformed our estimate of 2,860 mbpd.
MPC’s operating costs per barrel edged down from $5.19 in the year-ago quarter to $5.15. The company managed to reign in expenses due to lower energy outgo and disciplined execution. Our estimates factored in a higher unit cost of $5.20.
Midstream: This unit mainly reflects Marathon Petroleum’s general partner and majority limited partner interests in MPLX LP (MPLX - Free Report) — a publicly traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.
Segment profitability was $1.2 billion, up 6.7% from the second quarter of 2022. Earnings were supported by higher tariff rates and the stable, fee-based revenues from MPLX’s wide range of midstream energy services.
Financial Analysis
Marathon Petroleum, carrying a Zacks Rank #3 (Hold), reported expenses of $33.5 billion in second-quarter 2023, falling 27% from the year-ago quarter but coming above our projection of $24.5 billion.
You can see the complete list of today’s Zacks #1 Rank stocks here.
In the reported quarter, Marathon Petroleum spent $562 million on capital programs (43% on Refining & Marketing and 48% on the Midstream segment) compared to $577 million in the year-ago period. As of Jun 30, the company had cash and cash equivalents of $7.3 billion and total debt, including that of MPLX, of $27.3 billion, with a debt-to-capitalization of 46.3%.
In the second quarter, MPC repurchased $3.1 billion of shares and a further $800 million worth of shares in July. The company currently has a remaining authorization of $6.3 billion.
Some Key Refining Earnings
While we have discussed MPC’s second-quarter results in detail, let’s see how some other refining companies have fared this earnings season.
Phillips 66 (PSX - Free Report) reported adjusted earnings per share of $3.87, beating the Zacks Consensus Estimate of $3.54. The outperformance can be primarily attributed to lower expenses. The positives were partially offset by PSX’s declining refining margins worldwide.
For the reported quarter, Phillips 66 generated $955 million of net cash from operations, down from $1.8 billion a year ago. PSX’s capital expenditure and investments totaled $551 million. It paid out dividends of $474 million in the reported quarter. As of Jun 30, 2023, cash and cash equivalents were $3 billion. Meanwhile, Phillips 66 reported total debt of $19.9 billion, reflecting a consolidated debt to capitalization of 39%.
Another refining giant, Valero Energy (VLO - Free Report) , also reported better-than-expected second-quarter earnings. The EPS of $5.40 per share came in well above the Zacks Consensus Estimate of $5.08. This was on account of VLO’s increased renewable diesel sales volumes and a decline in total costs of sales.
At the end of the second quarter, VLO had cash and cash equivalents of $5.1 billion, while the company’s total debt and finance lease obligations amounted to $11.3 billion. Valero’s second-quarter capital investment was $458 million. Of the total, $382 million was allotted for sustaining the business.
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