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Marathon Petroleum (MPC) Down 7.2% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Marathon Petroleum Corporation (MPC - Free Report) . Shares have lost about 7.2% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is MPC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

First-Quarter 2018 Results

Marathon Petroleum reported weaker-than-expected first-quarter results on lower fuel margin and declining income from its retail division. The company’s earnings per share came in at 8 cents, well below the Zacks Consensus Estimate of 14 cents. Specifically, refining margin of $10.58 per barrel decreased versus $11.65 a year ago.

However, earnings improved from the year-ago period's bottom-line figure of 6 cents on the back of strength in Marathon Petroleum’s midstream segment.

Marathon Petroleum’s revenues of $18,984 million came below the Zacks Consensus Estimate of $22,390 million but improved 15.8% year over year.

Segmental Performance

Refining & Marketing: Operating loss from the Refining & Marketing segment was $133 million compared with $70 million in the year-ago quarter. The wider loss reflects assets dropdowns to its midstream subsidiary.

Total refined product sales volumes were 2,275 thousand barrels per day (mbpd), up from the 2,085 mbpd in the year-ago quarter. Moreover, throughput improved from 1,708 mbpd in the year-ago quarter to 1,905 mbpd.Capacity utilization, at 93%, was up from 83% in the first quarter of 2017.

Speedway: Income from the Speedway retail stations totaled $95 million, down 29.6% from the year-ago period. The segment results were impacted by decline in light product margins, higher operating expense, accelerated depreciation and reduced footfall at the stores due to multiple storms in the Northeast and Midwest markets.

Midstream: This unit includes Marathon Petroleum’s 100% interest in MPLX L.P. (MPLX - Research Report)    , a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.

Segment profitability was $567 million, up from $309 million in the first quarter of 2017. Earnings were buoyed by strength in volumes gathered, processed and fractionated. The unit was further aided by the addition of refining logistics assets and fuels distribution services from sponsor Marathon Petroleum.

Total Expenses

Marathon Petroleum reported expenses of $18,544 million in first-quarter 2018, 15.2% higher than the year-ago quarter.

Capital Expenditure, Balance Sheet & Share Repurchase

In the reported quarter, Marathon Petroleum spent $748 million on capital programs (64% on the Midstream segment). As of Mar 31, the company had cash and cash equivalents of $4,653 million and total debt of $17,258 million, with a debt-to-capitalization ratio of 46%.

During the quarter under review, Marathon Petroleum returned $1,550 million of capital to shareholders, including $1,330 million in share repurchases.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to three lower.

VGM Scores

At this time, MPC has a poor Growth Score of F. Its Momentum is doing a lot better with an A. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions looks promising. Notably, MPC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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