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What's in Store for Marathon Petroleum's (MPC) Q2 Earnings?

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Marathon Petroleum (MPC - Free Report) is expected to release second-quarter 2019 results before the opening bell on Aug 1.

In the last reported quarter, the independent oil refiner and marketer missed the Zacks Consensus Estimate for earnings by a huge margin on declining crude discounts. In fact, the company swung to a loss of 9 cents per share, in stark contrast to earnings of 8 cents recorded in the year-ago period. As far as earnings surprises are concerned, the Findlay, OH-based downstream operator surpassed the Zacks Consensus Estimate thrice in the last four quarters.

Investors are keeping their fingers crossed and hoping that the company can top earnings estimates this time around. However, our model indicates that Marathon Petroleum might not beat on earnings in the to-be-reported quarter.

Let’s see which way estimates are treading.

The current Zacks Consensus Estimate for the quarter to be reported is a profit of $1.33 on revenues of $31.23 billion. Notably, earnings estimates have moved south by 18% over the past 30 days. The bottom-line estimates compare unfavorably with the year-ago earnings of $2.27 a share. Nonetheless, the top-line estimates for the to-be-reported quarter indicate y/y growth of 39.4%

Let’s take a look at the factors that are likely to shape Marathon Petroleum’s second-quarter earnings.

Factors at Play

Marathon Petroleum’s revenues are expected to gain traction in the to-be-reported quarter on the back of the acquisition of Andeavor in fourth-quarter 2018.

Its retail division is expected to benefit from higher year-over-year margins and sales. The upcoming results are expected to be buoyed by Speedway and acquired retail assets of Andeavor. Notably, convenience stores at the end of the quarter are likely to total 3,918, higher than 2,744 in second-quarter 2018. The Zacks Consensus Estimate for merchandise sale and margins is pegged at $1,595 million and $455 million compared with the year-ago figures of $1,285 million and $366 million, respectively. Consequently, operating income from the retail division is likely to shoot up in the to-be-reported quarter.

Per the Zacks Consensus Estimate, the Midstream segment profitability is expected to reach $915 million from $617 million reported in the second quarter of 2019, benefiting from stronger contribution from MPLX and Andeavor Logistics.

Its refining segment’s earnings indicators are also giving positive signals. The Zacks Consensus Estimate for refined products sales volume and refinery throughput is pegged at 3,721 thousand barrels per day (mbpd) and 3,039 mbpd, higher than the year-ago reported figures of 2,392 mbpd and 2,038 mbpd, respectively. The blended crack in the quarter to be reported has risen to $16.41 a barrel from $14.07, which can buoy refining margins. Higher blended crack spreads and favorable sweet/sour differentials in the to-be-reported quarter bode well for the firm’s refining segment.

However, the company is bearing the brunt of increased costs over the last few quarters and the trend is likely to continue in the quarter to be reported, which may limit overall earnings. 

Earnings Whispers

Our proven model does not conclusively predict that Marathon Petroleum will beat the Zacks Consensus Estimate in the quarter to be reported. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and a 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 0.00%.

Zacks Rank: Marathon Petroleum currently has a Zacks Rank #3, which increases the predictive power of ESP. But we also need to have a positive Earnings ESP to be confident of a 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 negative estimate revisions.

Stocks to Consider

While earnings beat looks uncertain for Marathon Petroleum, here are some firms from the energy space that you may want to consider on the basis of our model, which shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Marathon Oil Corporation (MRO - Free Report) has an Earnings ESP of +0.48% and is a #3 Ranked player. The company is anticipated to release second-quarter 2019 earnings on Aug 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

NuStar Energy L.P. (NS - Free Report) is set to report second-quarter 2019 earnings on Aug 8. The stock has an Earnings ESP of +14.58% and a Zacks Rank #3.

Cheniere Energy, Inc. (LNG - Free Report) is set to report second-quarter 2019 earnings on Aug 8. The stock has an Earnings ESP of +88.46% and a Zacks Rank #2 (Buy).

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