MPLX LP (MPLX Quick QuoteMPLX - Free Report) is set to report third-quarter 2024 results on Nov. 5 before the opening bell.

The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.06 per unit, implying an improvement of 19.1% from the year-ago reported number. Estimates have not been revised in the past 30 days. The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $3.04 billion, suggesting a 4.4% uptick from the year-ago actuals.

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MPLX beat the consensus estimate for earnings in two of the trailing four quarters and missed the same twice, with the average negative surprise being 7.5%. This is depicted in the graph below:  

Q3 Earnings Whispers for MPLX

Our proven model doesn’t predict an earnings beat for MPLX this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here.

The large-cap master limited partnership has an Earnings ESP of 0.00%. MPLX currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

MPLX Factors to Note

As a large midstream energy player, the partnership’s overall business is less vulnerable to oil and gas price volatility. Shippers generally utilize midstream assets for the long term to transport and store commodities, thereby having minimal volumes and price risks. Thus, the partnership is expected to have generated stable and predictable cash flows in the September quarter. 

The Zacks Consensus Estimate for total pipeline throughput in the third quarter is pegged at 6,023.93 thousand barrels per day (MBbl/D), suggesting an improvement from 5,886 MBbl/D in the year-ago comparable quarter.

MPLX’s Stock Price Performance & Valuation

MPLX's stock has soared 32.5% over the past year compared with the oil-energysector’s rise of 3.9%. The Williams Companies Inc (WMB Quick QuoteWMB - Free Report) , another midstream energy major, has gained 53.5% over the same time frame, while Enbridge Inc (ENB Quick QuoteENB - Free Report) , in the same space, has surged 29.9%.

One-Year MPLX, WMB, ENB Stock Price Chart

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With the price increase, MPLX is appearing relatively overvalued. The partnership's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 10.05, which is trading at a premium compared to the industry average of 3.31.

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Investment Thesis of MPLX

MPLX's revenue growth is closely tied to U.S. oil production, which has recently shown signs of slowing. If production levels stagnate or decline further, MPLX may struggle to maintain its current revenue growth rate due to this heavy reliance on increasing oil output.

Also, MPLX’s profitability from transporting refined oil products may be adversely impacted by a recent decline in refining margins. This decline is due to a rise in global refining capacity, particularly in regions like Asia and the Middle East. As this capacity grows, demand may not increase at the same rate, potentially reducing MPLX's earnings from this segment.

Moreover, advancements in renewable energy technologies, like more efficient solar power and electric vehicles, could gradually reduce the demand for fossil fuels. This shift presents a potential long-term risk to MPLX, as the demand for its infrastructure may decline in response to a change from traditional energy sources.

Last Word

Considering the backdrop, it may be prudent for investors to get rid of the overvalued stock now.