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Marathon Petroleum (MPC) Down 9.2% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Marathon Petroleum (MPC - Free Report) . Shares have lost about 9.2% 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 Misses Q1 Earnings on Lower Crude Discounts

Marathon Petroleum reported weak first-quarter results on declining crude discounts.

The company reported adjusted loss per share of 9 cents. The Zacks Consensus Estimate was for a profit of a penny, while in the year-ago period the company earned 8 cents per share.

Marathon Petroleum’s revenues of $28.6 billion came below the Zacks Consensus Estimate of $29.1 billion but improved 50.7% year over year on growing throughput volumes.

Segmental Performance

Refining & Marketing: The Refining & Marketing segment reported operating loss of $334 million compared with loss of $133 million in the year-ago quarter. The deterioration reflects narrower crude differentials, in addition to lower gasoline margins. This more than offset the impact of higher refining margins and rising throughputs following the 2018 acquisition of Andeavor.

Specifically, refining margin of $11.17 per barrel increased versus $10.58 a year ago. Total refined product sales volumes were 3,669 thousand barrels per day (mbpd), up from the 2,261 mbpd in the year-ago quarter. Moreover, throughput increased from 1,905 mbpd in the year-ago quarter to 3,084 mbpd following the addition of the legacy Andeavor refineries.Capacity utilization during the quarter was 95%.

Retail: Income from the Retail segment totaled $170 million, up 78.9% 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 15.61 cents per gallon in the first quarter of 2018 to 17.15 cents per gallon in the quarter under review.

Midstream: Segment profitability was $908 million, up from $567 million in the first quarter of 2018. Earnings were buoyed by the addition of Andeavor Logistics results that contributed $220 million during the quarter. The unit was further aided by strong overall growth from all businesses that added $121 million to segment results.

Total Expenses

Marathon Petroleum reported expenses of $27.9 billion in first-quarter 2019, 50.7% higher than the year-ago quarter.

Capital Expenditure, Balance Sheet & Share Repurchase

In the reported quarter, Marathon Petroleum spent $1.3 billion on capital programs (62% on the Midstream segment). As of Mar 31, the company had cash and cash equivalents of $877 million and total debt of $28.1 billion, with a debt-to-capitalization ratio of 39.6%.

During the first quarter, Marathon Petroleum returned $1.2 billion of capital to shareholders, including $885 million in share buybacks.

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 -15.25% due to these changes.

VGM Scores

At this time, Marathon Petroleum has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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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