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Marathon Petroleum (MPC) Overcomes Low Margins to Q4 Beat
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Despite a challenging margin environment, Ohio-based independent oil refiner and marketer Marathon Petroleum Corp. (MPC - Free Report) reported strong fourth-quarter earnings on the back of solid operational performance.
The company’s earnings per share came in at 43 cents, higher than the Zacks Consensus Estimate of 25 cents and the year-ago income of 35 cents.
Marathon Petroleum posted revenues of $17,284 million, ahead of the Zacks Consensus Estimate of $13,500 million and up 10% year-over-year.
Segmental Performance
Refining & Marketing: The unit profitability was $219 million compared with $179 million in the year-ago quarter. The improvement reflects higher crack spreads, partly offset by lower product price realizations and higher turnaround-associated operating costs. The unit’s gross margin fell 10% to $11.41 a barrel.
Total refined product sales volumes were 2,252 thousand barrels per day (mbpd), essentially flat from the 2,257 mbpd in the year-ago quarter. However, throughput deteriorated from 1,839 mbpd in the year-ago quarter to 1,810 mbpd. Capacity utilization, at 93%, was down from 95% in the fourth quarter of 2015.
Speedway: Income from the Speedway retail stations totaled $165 million, 22% higher than the $135 million earned in the year-ago period. Rise in merchandise margins in addition to lower operating costs, buoyed the results. To some extent, lower light product margin hampered the numbers.
Midstream: This unit includes Marathon Petroleum’s 100% interest in MPLX L.P. (MPLX - Free Report) , a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.
Segment profitability was $245 million, up significantly from $94 million in the fourth quarter of 2015. Earnings were driven by operating results from the acquisition of natural gas processor and distributor MarkWest Energy Partners L.P. in late 2015. Contributions from new pipelines and marine equity investments provided further support.
Total Expenses
Marathon Petroleum reported expenses of $16,731 million in fourth-quarter 2016, 9% higher than $15,341 million in the year-ago quarter.
Capital Expenditure, Balance Sheet & Share Repurchase
In the reported quarter, Marathon Petroleum spent $837 million on capital programs (37% on Refining & Marketing segment and 45% on Midstream). As of Dec 31, 2016, the company had cash and cash equivalents of $887 million and total debt of $10,572 million, with a debt-to-capitalization ratio of 33%.
For this year, Marathon Petroleum has pledged to spend $1.7 billion on capital projects, excluding MPLX L.P.
Marathon Petroleum Corporation Price, Consensus and EPS Surprise
Amid pressure from hedge fund Elliott Management to enhance shareholder value, Marathon Petroleum said that it would speed up the previously announced plan to dropdown certain assets to its midstream partnership MPLX L.P. The company added that a designated committee to review the separation of its Speedway retail unit – another demand from the activist investor that owns 4% of Marathon Petroleum stock – is expected to provide an update by mid-2017.
Further, the downstream operator announced a cutback in its investments in a project that aims to connect integrate its Galveston Bay and Texas City refineries, by $500 million to $1.5 billion.
Share Performance
Marathon Petroleum shares have risen 24% over the past 6 months, while the Zacks categorized Oil Refining & Marketing industry has gained 19%.
Incorporated in 1959, Houston, TX-based McDermott International is an engineering and construction company, solely focused on the offshore oil and gas business. The company’s expected EPS growth rate for 3 to 5 years is currently 20%, as compared to the industry growth rate of just 0.20%.
Houston, TX-based Ultra Petroleum is an independent energy firm engaged in the acquisition, development, exploration and production of oil and gas properties. The company’s operations are focused on the Green River Basin of southwest Wyoming, mainly covering the Pinedale and the Jonah fields. It surpassed estimates in each of the last two quarters.
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Marathon Petroleum (MPC) Overcomes Low Margins to Q4 Beat
Despite a challenging margin environment, Ohio-based independent oil refiner and marketer Marathon Petroleum Corp. (MPC - Free Report) reported strong fourth-quarter earnings on the back of solid operational performance.
The company’s earnings per share came in at 43 cents, higher than the Zacks Consensus Estimate of 25 cents and the year-ago income of 35 cents.
Marathon Petroleum posted revenues of $17,284 million, ahead of the Zacks Consensus Estimate of $13,500 million and up 10% year-over-year.
Segmental Performance
Refining & Marketing: The unit profitability was $219 million compared with $179 million in the year-ago quarter. The improvement reflects higher crack spreads, partly offset by lower product price realizations and higher turnaround-associated operating costs. The unit’s gross margin fell 10% to $11.41 a barrel.
Total refined product sales volumes were 2,252 thousand barrels per day (mbpd), essentially flat from the 2,257 mbpd in the year-ago quarter. However, throughput deteriorated from 1,839 mbpd in the year-ago quarter to 1,810 mbpd. Capacity utilization, at 93%, was down from 95% in the fourth quarter of 2015.
Speedway: Income from the Speedway retail stations totaled $165 million, 22% higher than the $135 million earned in the year-ago period. Rise in merchandise margins in addition to lower operating costs, buoyed the results. To some extent, lower light product margin hampered the numbers.
Midstream: This unit includes Marathon Petroleum’s 100% interest in MPLX L.P. (MPLX - Free Report) , a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.
Segment profitability was $245 million, up significantly from $94 million in the fourth quarter of 2015. Earnings were driven by operating results from the acquisition of natural gas processor and distributor MarkWest Energy Partners L.P. in late 2015. Contributions from new pipelines and marine equity investments provided further support.
Total Expenses
Marathon Petroleum reported expenses of $16,731 million in fourth-quarter 2016, 9% higher than $15,341 million in the year-ago quarter.
Capital Expenditure, Balance Sheet & Share Repurchase
In the reported quarter, Marathon Petroleum spent $837 million on capital programs (37% on Refining & Marketing segment and 45% on Midstream). As of Dec 31, 2016, the company had cash and cash equivalents of $887 million and total debt of $10,572 million, with a debt-to-capitalization ratio of 33%.
For this year, Marathon Petroleum has pledged to spend $1.7 billion on capital projects, excluding MPLX L.P.
Marathon Petroleum Corporation Price, Consensus and EPS Surprise
Marathon Petroleum Corporation Price, Consensus and EPS Surprise | Marathon Petroleum Corporation Quote
Strategic Actions
Amid pressure from hedge fund Elliott Management to enhance shareholder value, Marathon Petroleum said that it would speed up the previously announced plan to dropdown certain assets to its midstream partnership MPLX L.P. The company added that a designated committee to review the separation of its Speedway retail unit – another demand from the activist investor that owns 4% of Marathon Petroleum stock – is expected to provide an update by mid-2017.
Further, the downstream operator announced a cutback in its investments in a project that aims to connect integrate its Galveston Bay and Texas City refineries, by $500 million to $1.5 billion.
Share Performance
Marathon Petroleum shares have risen 24% over the past 6 months, while the Zacks categorized Oil Refining & Marketing industry has gained 19%.
Zacks Rank & Stock Picks
Marathon Petroleum holds a Zacks Rank #3 (Hold).
Meanwhile, one can look at better-ranked energy players like McDermott International Inc. and Ultra Petroleum Corp. . Both carry Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Incorporated in 1959, Houston, TX-based McDermott International is an engineering and construction company, solely focused on the offshore oil and gas business. The company’s expected EPS growth rate for 3 to 5 years is currently 20%, as compared to the industry growth rate of just 0.20%.
Houston, TX-based Ultra Petroleum is an independent energy firm engaged in the acquisition, development, exploration and production of oil and gas properties. The company’s operations are focused on the Green River Basin of southwest Wyoming, mainly covering the Pinedale and the Jonah fields. It surpassed estimates in each of the last two quarters.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>