Morningstar

Marathon Petroleum Earnings: Profits Decline, but Still Relatively Strong; Repurchases To Continue

Marathon logo seen at a petrol station in Ohio.
Securities In This Article
Marathon Petroleum Corp
(MPC)

Marathon Petroleum’s MPC second-quarter adjusted earnings fell to $2.2 billion from $5.7 billion a year ago, exceeding market expectations, as refining market conditions weakened from record levels a year ago.

During the quarter, Marathon repurchased $3.1 billion in shares and has $6.3 billion remaining on existing authorizations, or about 11% of its current market cap.

Refining and marketing operating income fell to $2.3 billion from $7.1 billion the year before on weaker realized refining margins, which fell to $22.10/barrel from $37.5/bbl. Despite the decline in margins, they remain well above historical levels, supporting strong earnings and cash returns. Costs fell slightly to $5.15/bbl from $5.19/bbl last year as Marathon maintains the cost improvements made in recent years. The capture rate remained strong at 97% during the quarter thanks to improvements in commercial operations.

Shares have already increased sharply in the last month on those improvements. We have maintained Marathon is one of the better-positioned refiners given recent portfolio and cost improvements, but has looked fairly valued. This view is unchanged, but it remains a compelling option given the large repurchase program and high-quality asset base positioned to capitalize on a strong refining market.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Allen Good, CFA

Director
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Allen Good, CFA, is a director, Europe, for Morningstar*. Based in Amsterdam, he covers the oil and gas industries as well as manages a team of multi-industry analysts. He is also chair of the Morningstar Research Services Economic Moat Committee, a group of senior members of the equity research team responsible for reviewing all Economic Moat ratings issued by Morningstar. In this role, he is responsible for ensuring consistent application of Morningstar’s Economic Moat methodology across sectors and regions as well as updating and revising the methodology. His specialty is global integrated oils such as Exxon, Chevron and Shell and US independent refiners such as Valero and Marathon Petroleum. He also contributes to developing hydrocarbon price and petroleum product margin forecasts used in valuation models.

Before joining Morningstar in 2008, He performed merger and acquisition advisory work for a middle-market investment bank. Before that, he spent several years at Black & Decker in various operational roles, primarily focused on manufacturing and distribution.

Good holds a bachelor’s degree in business from the University of Tennessee and a master’s degree in business administration from Kenan-Flagler Business School at the University of North Carolina. He also holds the Chartered Financial Analyst® designation.

* Morningstar Holland BV (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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