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Can Marathon Petroleum (MPC) Pull a Surprise in Q3 Earnings?
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Marathon Petroleum (MPC - Free Report) is expected to release third-quarter 2018 results before the opening bell on Thursday, Nov 1. The current Zacks Consensus Estimate for the quarter under review is a profit of $1.68 per share on revenues of $22.9 billion.
In the preceding three-month period, the independent oil refiner and marketer beat the consensus mark by 14.7% on higher fuel margin and rising income from its midstream division.
As far as earnings surprises are concerned, the Findlay, OH-based downstream operator is on a firm footing, having gone past the Zacks Consensus Estimate thrice in the last four reports. This is depicted in the graph below:
Marathon Petroleum Corporation Price and EPS Surprise
Investors are keeping their fingers crossed and hoping that the company can continue winning ways by surpassing earnings estimate this time around too. However, our model indicates that Marathon Petroleum might not beat on earnings in the third quarter.
Let’s delve deeper and find out the factors impacting the results.
Factors to Consider This Quarter
We expect lower crack spreads to affect the company’s bottom line in the third quarter of 2018. In particular, this is expected to suppress the financial and operational performance of the Refining & Marketing segment – the main contributor to Marathon Petroleum earnings.
Per Marathon Petroleum, crack spread (or the margin for making petroleum products from crude) in third quarter 2018 was $9.76 a barrel, down from $12.69 a year earlier.
Consequently, the Zacks Consensus Estimate for the refining segment’s bottom line stands at $673 million. This is sharply lower than the year-ago operating income of $1.1 billion.
Moreover, Marathon Petroleum’s Speedway (or Retail) division is expected to see its income fall mainly due to margin compression triggered by the large increase in retail fuel prices. We note that the current Zacks Consensus Estimate for the quarterly income from operations is $178 million, below the $209 million reported in the year-ago quarter.
However, the segment income is likely to increase from the second quarter’s $159 million as additional retail locations in some of Marathon Petroleum’s key growth markets should benefit the unit’s bottom line.
Also, Midstream segment profitability is expected to reach $649 million, up significantly from $355 million in the third quarter of 2017 and improving by $32 million sequentially. Earnings are likely to be buoyed by strength in volumes gathered, processed and fractionated.
What Does Our Model Say?
Our proven model too does not conclusively predict that Marathon Petroleum will beat the Zacks Consensus Estimate this quarter. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -0.27%.
Zacks Rank: Marathon Petroleum currently has a Zacks Rank of 3, which increases the predictive power of ESP. But we need to have a positive Earnings ESP to be sure of the positive surprise.
Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.
Stocks to Consider
While earnings beat looks uncertain for Marathon Petroleum, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
Apache Corporation (APA - Free Report) has an Earnings ESP of +4.85% and a Zacks Rank #2. The company is expected to release earnings on Oct 31.
NOW Inc. (DNOW - Free Report) has an Earnings ESP of +5.61% and a Zacks Rank #2. The company is anticipated to release earnings on Nov 1.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Can Marathon Petroleum (MPC) Pull a Surprise in Q3 Earnings?
Marathon Petroleum (MPC - Free Report) is expected to release third-quarter 2018 results before the opening bell on Thursday, Nov 1. The current Zacks Consensus Estimate for the quarter under review is a profit of $1.68 per share on revenues of $22.9 billion.
In the preceding three-month period, the independent oil refiner and marketer beat the consensus mark by 14.7% on higher fuel margin and rising income from its midstream division.
As far as earnings surprises are concerned, the Findlay, OH-based downstream operator is on a firm footing, having gone past the Zacks Consensus Estimate thrice in the last four reports. This is depicted in the graph below:
Marathon Petroleum Corporation Price and EPS Surprise
Marathon Petroleum Corporation Price and EPS Surprise | Marathon Petroleum Corporation Quote
Investors are keeping their fingers crossed and hoping that the company can continue winning ways by surpassing earnings estimate this time around too. However, our model indicates that Marathon Petroleum might not beat on earnings in the third quarter.
Let’s delve deeper and find out the factors impacting the results.
Factors to Consider This Quarter
We expect lower crack spreads to affect the company’s bottom line in the third quarter of 2018. In particular, this is expected to suppress the financial and operational performance of the Refining & Marketing segment – the main contributor to Marathon Petroleum earnings.
Per Marathon Petroleum, crack spread (or the margin for making petroleum products from crude) in third quarter 2018 was $9.76 a barrel, down from $12.69 a year earlier.
Consequently, the Zacks Consensus Estimate for the refining segment’s bottom line stands at $673 million. This is sharply lower than the year-ago operating income of $1.1 billion.
Moreover, Marathon Petroleum’s Speedway (or Retail) division is expected to see its income fall mainly due to margin compression triggered by the large increase in retail fuel prices. We note that the current Zacks Consensus Estimate for the quarterly income from operations is $178 million, below the $209 million reported in the year-ago quarter.
However, the segment income is likely to increase from the second quarter’s $159 million as additional retail locations in some of Marathon Petroleum’s key growth markets should benefit the unit’s bottom line.
Also, Midstream segment profitability is expected to reach $649 million, up significantly from $355 million in the third quarter of 2017 and improving by $32 million sequentially. Earnings are likely to be buoyed by strength in volumes gathered, processed and fractionated.
What Does Our Model Say?
Our proven model too does not conclusively predict that Marathon Petroleum will beat the Zacks Consensus Estimate this quarter. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -0.27%.
Zacks Rank: Marathon Petroleum currently has a Zacks Rank of 3, which increases the predictive power of ESP. But we need to have a positive Earnings ESP to be sure of the positive surprise.
Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.
Stocks to Consider
While earnings beat looks uncertain for Marathon Petroleum, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
CNX Resources Corporation (CNX - Free Report) has an Earnings ESP of +1.80% and a Zacks Rank #2 (Buy). The company is anticipated to release earnings on Oct 30. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Apache Corporation (APA - Free Report) has an Earnings ESP of +4.85% and a Zacks Rank #2. The company is expected to release earnings on Oct 31.
NOW Inc. (DNOW - Free Report) has an Earnings ESP of +5.61% and a Zacks Rank #2. The company is anticipated to release earnings on Nov 1.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>