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Marathon Petroleum (MPC) Q3 Earnings Top as Throughput Rises

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Independent oil refiner and marketer Marathon Petroleum Corporation MPC reported adjusted earnings per share of $1.63, above the Zacks Consensus Estimate of $1.30. The beat was driven by strong throughput, which increased 55% from the third quarter of 2018. 

However, the bottom line was 4.1% below the year-earlier quarter's earnings due to higher costs and expenses.

Marathon Petroleum’s revenues of $31.2 billion missed the Zacks Consensus Estimate of $31.5 billion but surged 34.9% year over year.

Other Developments

Concurrent with the earnings release, the company announced plans to separate its Speedway (or the retail) business and said that CEO Gary Heminger is set to retire. Finally, the Findlay, OH-based downstream operator – under pressure from billionaire activist investor Paul Singer’s Elliott Management Corp.– promised the formation of a special committee to look into potential strategic alternatives for its midstream unit.

Marathon Petroleum Corporation Price, Consensus and EPS Surprise


Marathon Petroleum Corporation Price, Consensus and EPS Surprise

Marathon Petroleum Corporation price-consensus-eps-surprise-chart | Marathon Petroleum Corporation Quote

Segmental Performance

Refining & Marketing: The Refining & Marketing segment reported operating income of $883 million, higher than $666 million in the year-ago quarter and ahead of the Zacks Consensus Estimate of $708 million. The improvement reflects higher y/y refining margins and rising throughputs (primarily on account of last year’s Andeavor acquisition).

Specifically, refining margin of $14.66 per barrel increased versus $14.25 a year ago. Total refined product sales volumes were 3,706 thousand barrels per day (mbpd), up from the 2,382 mbpd in the year-ago quarter. Moreover, throughput increased from 2,032 mbpd in the year-ago quarter to 3,156 mbpd following the addition of the legacy Andeavor refineries.Capacity utilization during the quarter was 98%.

Retail: Income from the Retail segment totaled $442 million, surging 174.5% from the year-ago period. In addition to strong performance at Marathon Petroleum’s former Speedway unit, the segment’s 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 16.5 cents per gallon in the third quarter of 2018 to 24.5 cents per gallon in the quarter under review. Meanwhile, same-store merchandise sales were up by 5.2% year over year.

Midstream: This unit mainly reflects Marathon Petroleum’s the general partner and majority limited partner interests in MPLX LP MPLX – a publicly-traded master limited partnerships that own, operate, develop and acquire pipelines and other midstream assets.

Segment profitability was $919 million, up from $679 million in the third quarter of 2018 and ahead of the Zacks Consensus Estimate of $912 million. Earnings were buoyed by strong overall growth across MPLX’s businesses, supported by contributions from legacy Andeavor Logistics assets.

Costs, Capex & Balance Sheet

Marathon Petroleum – which spun off from Marathon Oil Corporation MRO in 2011 – reported expenses of $29.2 billion in third-quarter 2019, 34.3% higher than the year-ago quarter.

In the reported quarter, Marathon Petroleum spent $1.6 billion on capital programs (50% on the Midstream segment). As of Sep 30, the company had cash and cash equivalents of $1.5 billion and a total debt of $28.8 billion, with a debt-to-capitalization ratio of 40.3%.

During the third quarter, Marathon Petroleum returned $848 million of capital to shareholders, including $500 million in share buybacks. 

Zacks Rank & Stock Pick

Marathon Petroleum holds a Zacks Rank #3 (Hold).

A better-ranked player in the energy space is TC Energy (TRP - Free Report) that sports a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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