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Marathon (MPC) Q3 Earnings Top Despite a Decline in Margins
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Independent oil refiner and marketer Marathon Petroleum Corporation (MPC - Free Report) reported third-quarter adjusted earnings per share of $8.14, which comfortably beat the Zacks Consensus Estimate of $7.79 and came ahead of the year-ago adjusted profit of $7.81. The outperformance primarily reflects lower costs and expenses, which offset the effect of a drop in refining margin.
Marathon Petroleum reported revenues of $41.6 billion, which beat the Zacks Consensus Estimate of $35.3 billion but declined 12% year over year due to a dip in throughput and capacity utilization.
In an important development for investors, MPC’s board of directors declared a quarterly cash dividend of 82.50 cents per share to its common shareholders of record on Nov 16. The payout, which represents a 10% sequential increase, will be made on Dec 11.
Marathon Petroleum Corporation Price, Consensus and EPS Surprise
Refining & Marketing: The Refining & Marketing segment reported an operating income of $3.8 billion, which fell 18.8% from the year-ago profit of $4.6 billion. The decline primarily reflects lower year-over-year margins and a decrease in capacity utilization.
Specifically, the refining margin of $26.16 per barrel declined from $30.21 a year ago and came below our estimate of $31.33. Capacity utilization during the quarter was 94%, down from 98% in the corresponding period of 2022. We expected the metric to be 94.2%.
Meanwhile, total refined product sales volumes were 3,596 thousand barrels per day (mbpd), up from 3,587 mbpd in the year-ago quarter and our estimate of 3,574.6 mbpd. However, throughput fell from 3,007 mbpd in the year-ago quarter to 2,959 mbpd but outperformed our estimate of 2,930 mbpd.
MPC’s operating costs per barrel dropped from $5.63 in the year-ago quarter to $5.14. The company managed to rein in expenses due to lower energy outgo. Our estimates factored in a slightly lower unit cost of $5.10.
Midstream: This unit mainly reflects Marathon Petroleum’s general partner and majority limited partner interests in MPLX LP — a publicly traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.
Segment profitability was $1.1 billion, down 3.4% from the third quarter of 2022. Earnings were adversely affected by lower natural gas liquids prices.
Financial Analysis
Marathon Petroleum, carrying a Zacks Rank #2 (Buy), reported expenses of $36.8 billion in third-quarter 2023, falling 9.2% from the year-ago quarter but surpassing our projection of $28.9 billion.
In the reported quarter, Marathon Petroleum spent $522 million on capital programs (49% on Refining & Marketing and 45% on the Midstream segment) compared to $789 million in the year-ago period. As of Sep 30, the company had cash and cash equivalents of $8.5 billion and total debt, including that of MPLX, of $27.3 billion, with a debt-to-capitalization of 46.2%.
In the third quarter, MPC repurchased $2.8 billion of shares and a further $1 billion worth of shares in October. The company, which gave an additional $5 billion share repurchase approval, currently has a remaining authorization of $8.3 billion.
Some Key Refining Earnings
While we have discussed MPC’s third-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 $4.63, missing the Zacks Consensus Estimate of $4.78. The underperformance can be primarily attributed to declining refining margins worldwide. This was partially offset by PSX’s lower costs.
For the reported quarter, Phillips 66 generated $2.7 billion of net cash from operations, down from $3.1 billion a year ago. PSX’s capital expenditure and investments totaled $855 million. It paid out dividends of $465 million in the reported quarter. As of Sep 30, 2023, cash and cash equivalents were $3.5 billion. Meanwhile, Phillips 66 reported a total debt of $19.4 billion, reflecting a consolidated debt to capitalization of 39%.
Meanwhile, another refining giant — Valero Energy (VLO - Free Report) — reported better-than-expected third-quarter earnings. EPS of $7.49 per share came in above the Zacks Consensus Estimate of $7.36. This was on account of VLO’s increased refining throughput volumes and a decline in total costs of sales.
At the end of the third quarter, VLO had cash and cash equivalents of $5.8 billion, while the company’s total debt and finance lease obligations amounted to $11.4 billion. Valero’s third-quarter capital investment was $394 million. Of the total, $303 million was allotted for sustaining the business.
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Marathon (MPC) Q3 Earnings Top Despite a Decline in Margins
Independent oil refiner and marketer Marathon Petroleum Corporation (MPC - Free Report) reported third-quarter adjusted earnings per share of $8.14, which comfortably beat the Zacks Consensus Estimate of $7.79 and came ahead of the year-ago adjusted profit of $7.81. The outperformance primarily reflects lower costs and expenses, which offset the effect of a drop in refining margin.
Marathon Petroleum reported revenues of $41.6 billion, which beat the Zacks Consensus Estimate of $35.3 billion but declined 12% year over year due to a dip in throughput and capacity utilization.
In an important development for investors, MPC’s board of directors declared a quarterly cash dividend of 82.50 cents per share to its common shareholders of record on Nov 16. The payout, which represents a 10% sequential increase, will be made on Dec 11.
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 $3.8 billion, which fell 18.8% from the year-ago profit of $4.6 billion. The decline primarily reflects lower year-over-year margins and a decrease in capacity utilization.
Specifically, the refining margin of $26.16 per barrel declined from $30.21 a year ago and came below our estimate of $31.33. Capacity utilization during the quarter was 94%, down from 98% in the corresponding period of 2022. We expected the metric to be 94.2%.
Meanwhile, total refined product sales volumes were 3,596 thousand barrels per day (mbpd), up from 3,587 mbpd in the year-ago quarter and our estimate of 3,574.6 mbpd. However, throughput fell from 3,007 mbpd in the year-ago quarter to 2,959 mbpd but outperformed our estimate of 2,930 mbpd.
MPC’s operating costs per barrel dropped from $5.63 in the year-ago quarter to $5.14. The company managed to rein in expenses due to lower energy outgo. Our estimates factored in a slightly lower unit cost of $5.10.
Midstream: This unit mainly reflects Marathon Petroleum’s general partner and majority limited partner interests in MPLX LP — a publicly traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.
Segment profitability was $1.1 billion, down 3.4% from the third quarter of 2022. Earnings were adversely affected by lower natural gas liquids prices.
Financial Analysis
Marathon Petroleum, carrying a Zacks Rank #2 (Buy), reported expenses of $36.8 billion in third-quarter 2023, falling 9.2% from the year-ago quarter but surpassing our projection of $28.9 billion.
You can see the complete list of today’s Zacks #1 Rank stocks here.
In the reported quarter, Marathon Petroleum spent $522 million on capital programs (49% on Refining & Marketing and 45% on the Midstream segment) compared to $789 million in the year-ago period. As of Sep 30, the company had cash and cash equivalents of $8.5 billion and total debt, including that of MPLX, of $27.3 billion, with a debt-to-capitalization of 46.2%.
In the third quarter, MPC repurchased $2.8 billion of shares and a further $1 billion worth of shares in October. The company, which gave an additional $5 billion share repurchase approval, currently has a remaining authorization of $8.3 billion.
Some Key Refining Earnings
While we have discussed MPC’s third-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 $4.63, missing the Zacks Consensus Estimate of $4.78. The underperformance can be primarily attributed to declining refining margins worldwide. This was partially offset by PSX’s lower costs.
For the reported quarter, Phillips 66 generated $2.7 billion of net cash from operations, down from $3.1 billion a year ago. PSX’s capital expenditure and investments totaled $855 million. It paid out dividends of $465 million in the reported quarter. As of Sep 30, 2023, cash and cash equivalents were $3.5 billion. Meanwhile, Phillips 66 reported a total debt of $19.4 billion, reflecting a consolidated debt to capitalization of 39%.
Meanwhile, another refining giant — Valero Energy (VLO - Free Report) — reported better-than-expected third-quarter earnings. EPS of $7.49 per share came in above the Zacks Consensus Estimate of $7.36. This was on account of VLO’s increased refining throughput volumes and a decline in total costs of sales.
At the end of the third quarter, VLO had cash and cash equivalents of $5.8 billion, while the company’s total debt and finance lease obligations amounted to $11.4 billion. Valero’s third-quarter capital investment was $394 million. Of the total, $303 million was allotted for sustaining the business.