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Marathon Petroleum (MPC) Down 9.7% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Marathon Petroleum (MPC - Free Report) . Shares have lost about 9.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Marathon Petroleum 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 catalysts.

Marathon Petroleum Beats Q4 Earnings on Andeavor Contribution

Marathon Petroleum reported strong fourth-quarter earnings on favorable crude differentials, growing throughput volumes and higher fuel margin.

The company’s adjusted earnings per share came in at $2.41, well ahead of the Zacks Consensus Estimate of $1.98 and the year-ago period's bottom-line figure of $1.05.

Marathon Petroleum’s revenues of $32.5 billion improved 53% year over year but came slightly below the Zacks Consensus Estimate of $33.2 billion.

Segmental Performance

Refining & Marketing: Operating profit from the Refining & Marketing segment was $923 million compared with $732 million in the year-ago quarter. The improvement reflects wider crude differentials, in addition to rising throughputs following the 2018 acquisition of Andeavor

Total refined product sales volumes were 3,764 thousand barrels per day (mbpd), up from the 2,414 mbpd in the year-ago quarter. Moreover, throughput increased from 2,024 mbpd in the year-ago quarter to 3,111 mbpd.Capacity utilization during the quarter was 94%.

Retail: Income from the Retail segment totaled $613 million, up more than four-fold from the year-ago period. Apart from strong performance at Marathon Petroleum’s former Speedway unit, the segment results were buoyed by contribution from the acquired retail assets of Andeavor. Across the board, the Retail segment benefitted from higher fuel margins and merchandise sales. In particular, the company's retail fuel margin rose from 17.72 cents per gallon in the fourth quarter of 2017 to 32.35 cents per gallon in the quarter under review.

Midstream: Segment profitability was $889 million, up from $343 million in the fourth quarter of 2017. Earnings were buoyed by the addition of Andeavor Logistics results that contributed $230 million during the quarter. The unit was further aided by the dropdown of refining logistics assets and fuels distribution services from sponsor Marathon Petroleum to MPLX. Finally, the unit benefited from strength in throughput volumes as well as record  gathered and processed volumes.

Total Expenses

Marathon Petroleum reported expenses of $30.5 billion in fourth-quarter 2018, 52% higher than the year-ago quarter.

Capital Expenditure, Balance Sheet & Share Repurchase
 
In the reported quarter, Marathon Petroleum spent $1.7 billion on capital programs (56% on the Midstream segment). As of Dec 31, the company had cash and cash equivalents of $1.7 billion and total debt of $27.5 billion, with a debt-to-capitalization ratio of 38.4%.

During the full year 2018, Marathon Petroleum returned $4.2 billion of capital to shareholders, including $675 million in share buybacks in the fourth quarter.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -35.95% due to these changes.

VGM Scores

At this time, Marathon Petroleum has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

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


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