Aggressive · Stocks to Consider and Updates

Marathon Petroleum Tops Estimates on Refining Beat and Retail Strength

Oil refiner and marketer Marathon Petroleum Corp. (NYSE: MPC – $57.85) beat estimates for quarterly profits benefiting from better-than-expected earnings from its refining segment as well as higher sales in its gas station businesses. Excluding items, it earned $1.73 per share, beating the analysts’ average estimate of $1.32 vs. $2.27 per share last year as more shares are on the books following recent acquisitions. Revenue for the second period totaled $33.5 billion compared to $22.3 billion last year. The company saw strong performance at its Retail segment, which includes Speedway and Marathon locations. Income from Retail was $493 million compared to $159 million a year ago. Midstream segment income, which primarily reflects the results of MPLX LP and Andeavor Logistics, was $878 million in the quarter compared with $617 million for the second quarter of 2018. Both segments offset its lower profits in Refining & Marketing, where earnings fell 11.6% to $906 million, but beat analysts’ estimates of $623.5 million.  Refiners in the United States have suffered from a lack of low-cost heavy crude in a market that has been hit by sanctions on Venezuela and Iran, and production cuts from Canada’s Alberta province and OPEC members.

       While full-year 2019 earnings may only come in at $4.50 per share, 2020 appears to be looking a bit brighter with Street estimates of $7.50 – $7.56. The company is continuing to realize synergies from the large 2018 Andeavor acquisition with $270 million in savings posted this quarter bringing the total to about $563 billion since October of last year. I believe the shares are oversold at current levels and should offer higher investor valuations in the years to come. The generous $2.12 annual dividend, yielding 3.76%, adds to the shares long-term total return potential.

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