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Is Marathon (MPC) a Buy Ahead of Q1 Earnings Announcement?
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We will hear first-quarter earnings from Marathon Petroleum (MPC - Free Report) on Apr 30, before market open. The stock has been in breakneck mode this year, notching up a series of all-time highs, as the refiner and marketer of crude oil has benefited from strength in the Energy space.
Let’s see if it’s time to buy into Marathon Petroleum’s momentum with MPC shares soaring around 34% year to date to easily top the S&P 500 and the Zacks Oil and Gas - Refining & Marketing industry.
Image Source: Zacks Investment Research
Quarterly Expectations
Analysts have been quite bullish for the quarter to be reported, with the $2.53 per share estimate being revised 36% higher in the past 30 days. The current Zacks Consensus Estimate for the to-be-reported quarter's revenue is $31.3 billion.
Despite easing from the remarkable highs of 2022, refining margins are still at healthy levels. Crack spreads, indicating the difference between refined product prices and crude oil, remain comfortably above historical benchmarks even as they revert to more typical ranges. These spreads, crucial for driving profits in oil and gas refining and marketing, augur well for downstream operators, ensuring robust profitability amid normalization.
Historical Performance & Valuation
The company has exceeded the earnings mark in each of the past four quarters, delivering an average earnings surprise of 24% over that timeframe. As a matter of fact, MPC has established a long history of beating earnings estimates, with the last miss seen way back in the second quarter of 2019.
Marathon Petroleum Corporation Price and EPS Surprise
Trading at a little over $198 per share and 10.21X forward price-to-earnings ratio, Marathon Petroleum has a VGM Score of A. In fact, the company trades significantly below its five-year high of 172.22X and at a 52% discount to the S&P 500's 21.13X.
Catalysts for Q1
Obviously, the recent rise in oil prices has played a key role in MPC’s surge. That's a big boon for the company, given that it drives prices at the pumps. Marathon Petroleum also benefited from low U.S. gasoline and distillate inventories. This supports strong crack spreads.
Further, the company's strategic investment in its publicly traded master limited partnership MPLX LP (that owns, operates, develops and acquires pipelines and other midstream assets) allows it to allocate a significant portion of its free cash flow to investor returns, including share buybacks. With MPLX covering the entire dividend and a portion of capital spending, MPC can maintain its share repurchase program, regardless of refining business cyclicality. This indicates potential for sustained profitability and shareholder value enhancement.
Bottom Line
Marathon Petroleum’s robust crack spreads and increasing distributions from its energy infrastructure partnership are rather intriguing, with this compelling investment landing a Zacks Rank #2 (Buy) at the moment. To that point, 2024 and 2025 earnings estimates have trended higher over the last two months, which is a good sign that MPC may be able to reach or exceed its bottom-line expectations and extend this year’s rally.
3 Other Energy Stocks to Consider
Investors interested in the Oil/Energy space could also benefit from having stocks like SM Energy Company (SM - Free Report) , Murphy USA (MUSA - Free Report) and Global Partners LP (GLP - Free Report) in their portfolio. These companies currently sport a Zacks Rank #1 (Strong Buy) each.
SM Energy Company: SM beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. SM Energy has a trailing four-quarter earnings surprise of 14.2%, on average.
SM is valued at around $5.6 billion. SM Energy has seen its shares increase 72.1% in a year.
Murphy USA: The 2024 Zacks Consensus Estimate for MUSA indicates 3.6% year-over-year earnings per share growth.
Murphy USA is valued at around $8.7 billion. MUSA has seen its stock rise 49.9% in a year.
Global Partners LP: Global Partners is valued at some $1.6 billion. The 2024 Zacks Consensus Estimate for GLP indicates 3.7% year-over-year earnings per unit growth.
Global Partners beat the Zacks Consensus Estimate for earnings in two of the trailing four quarters and missed in the other two, the average being 5.9%. GLP units have surged 49.4% in a year.
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Is Marathon (MPC) a Buy Ahead of Q1 Earnings Announcement?
We will hear first-quarter earnings from Marathon Petroleum (MPC - Free Report) on Apr 30, before market open. The stock has been in breakneck mode this year, notching up a series of all-time highs, as the refiner and marketer of crude oil has benefited from strength in the Energy space.
Let’s see if it’s time to buy into Marathon Petroleum’s momentum with MPC shares soaring around 34% year to date to easily top the S&P 500 and the Zacks Oil and Gas - Refining & Marketing industry.
Image Source: Zacks Investment Research
Quarterly Expectations
Analysts have been quite bullish for the quarter to be reported, with the $2.53 per share estimate being revised 36% higher in the past 30 days. The current Zacks Consensus Estimate for the to-be-reported quarter's revenue is $31.3 billion.
Despite easing from the remarkable highs of 2022, refining margins are still at healthy levels. Crack spreads, indicating the difference between refined product prices and crude oil, remain comfortably above historical benchmarks even as they revert to more typical ranges. These spreads, crucial for driving profits in oil and gas refining and marketing, augur well for downstream operators, ensuring robust profitability amid normalization.
Historical Performance & Valuation
The company has exceeded the earnings mark in each of the past four quarters, delivering an average earnings surprise of 24% over that timeframe. As a matter of fact, MPC has established a long history of beating earnings estimates, with the last miss seen way back in the second quarter of 2019.
Marathon Petroleum Corporation Price and EPS Surprise
Marathon Petroleum Corporation price-eps-surprise | Marathon Petroleum Corporation Quote
Trading at a little over $198 per share and 10.21X forward price-to-earnings ratio, Marathon Petroleum has a VGM Score of A. In fact, the company trades significantly below its five-year high of 172.22X and at a 52% discount to the S&P 500's 21.13X.
Catalysts for Q1
Obviously, the recent rise in oil prices has played a key role in MPC’s surge. That's a big boon for the company, given that it drives prices at the pumps. Marathon Petroleum also benefited from low U.S. gasoline and distillate inventories. This supports strong crack spreads.
Further, the company's strategic investment in its publicly traded master limited partnership MPLX LP (that owns, operates, develops and acquires pipelines and other midstream assets) allows it to allocate a significant portion of its free cash flow to investor returns, including share buybacks. With MPLX covering the entire dividend and a portion of capital spending, MPC can maintain its share repurchase program, regardless of refining business cyclicality. This indicates potential for sustained profitability and shareholder value enhancement.
Bottom Line
Marathon Petroleum’s robust crack spreads and increasing distributions from its energy infrastructure partnership are rather intriguing, with this compelling investment landing a Zacks Rank #2 (Buy) at the moment. To that point, 2024 and 2025 earnings estimates have trended higher over the last two months, which is a good sign that MPC may be able to reach or exceed its bottom-line expectations and extend this year’s rally.
3 Other Energy Stocks to Consider
Investors interested in the Oil/Energy space could also benefit from having stocks like SM Energy Company (SM - Free Report) , Murphy USA (MUSA - Free Report) and Global Partners LP (GLP - Free Report) in their portfolio. These companies currently sport a Zacks Rank #1 (Strong Buy) each.
You can see the complete list of today’s Zacks #1 Rank stocks here.
SM Energy Company: SM beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. SM Energy has a trailing four-quarter earnings surprise of 14.2%, on average.
SM is valued at around $5.6 billion. SM Energy has seen its shares increase 72.1% in a year.
Murphy USA: The 2024 Zacks Consensus Estimate for MUSA indicates 3.6% year-over-year earnings per share growth.
Murphy USA is valued at around $8.7 billion. MUSA has seen its stock rise 49.9% in a year.
Global Partners LP: Global Partners is valued at some $1.6 billion. The 2024 Zacks Consensus Estimate for GLP indicates 3.7% year-over-year earnings per unit growth.
Global Partners beat the Zacks Consensus Estimate for earnings in two of the trailing four quarters and missed in the other two, the average being 5.9%. GLP units have surged 49.4% in a year.