Dj Marathon Petroleum Corp. Stock Outperforms Competitors On Strong Trading Day

Marathon Petroleum (MPC) has been one of the most searched-for stocks on Zacks.com lately. So, you might want to look at some of the facts that could shape the stock's performance in the near term.

Shares of this refiner have returned -1.2% over the past month versus the Zacks S&P 500 composite's +3% change. The Zacks Oil and Gas - Refining and Marketing industry, to which Marathon Petroleum belongs, has lost 9% over this period. Now the key question is: Where could the stock be headed in the near term?

While media releases or rumors about a substantial change in a company's business prospects usually make its stock 'trending' and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.

Revisions to Earnings Estimates

Rather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.

Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

Marathon Petroleum is expected to post earnings of $0.65 per share for the current quarter, representing a year-over-year change of -83.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -27%.

For the current fiscal year, the consensus earnings estimate of $10.20 points to a change of -56.8% from the prior year. Over the last 30 days, this estimate has changed +8.9%.

For the next fiscal year, the consensus earnings estimate of $10.28 indicates a change of +0.8% from what Marathon Petroleum is expected to report a year ago. Over the past month, the estimate has changed -2.1%.

Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Marathon Petroleum is rated Zacks Rank #3 (Hold).

The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:

12 Month EPS

Projected Revenue Growth

While earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.

In the case of Marathon Petroleum, the consensus sales estimate of $31.93 billion for the current quarter points to a year-over-year change of -13.3%. The $141.19 billion and $128.03 billion estimates for the current and next fiscal years indicate changes of -6.1% and -9.3%, respectively.

Last Reported Results and Surprise History

Marathon Petroleum reported revenues of $35.37 billion in the last reported quarter, representing a year-over-year change of -14.9%. EPS of $1.87 for the same period compares with $8.14 a year ago.

Compared to the Zacks Consensus Estimate of $31.58 billion, the reported revenues represent a surprise of +12.03%. The EPS surprise was +92.78%.

The company beat consensus EPS estimates in each of the trailing four quarters. The company topped consensus revenue estimates each time over this period.

Valuation

Without considering a stock's valuation, no investment decision can be efficient. In predicting a stock's future price performance, it's crucial to determine whether its current price correctly reflects the intrinsic value of the underlying business and the company's growth prospects.

Comparing the current value of a company's valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.

The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Marathon Petroleum is graded A on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Bottom Line

The facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Marathon Petroleum. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.

Zacks Investment Research

Designed to provide broad exposure to the Energy - Exploration segment of the equity market, the iShares U.S. Oil & Gas Exploration & Production ETF (IEO) is a passively managed exchange traded fund launched on 05/01/2006.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Exploration is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 16, placing it in bottom 0%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $642.16 million, making it one of the larger ETFs attempting to match the performance of the Energy - Exploration segment of the equity market. IEO seeks to match the performance of the Dow Jones U.S. Select Oil Exploration & Production Index before fees and expenses.

The Dow Jones U.S. Select Oil Exploration & Production Index is a free-float adjusted market capitalization-weighted index. The Index includes companies that are engaged in the exploration for and extraction, production, refining, and supply of oil and gas products.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.40%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 2.85%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Energy sector--about 99.80% of the portfolio.

Looking at individual holdings, Conocophillips (COP) accounts for about 18.78% of total assets, followed by Eog Resources Inc (EOG) and Marathon Petroleum Corp (MPC).

The top 10 holdings account for about 69.42% of total assets under management.

Performance and Risk

The ETF has added roughly 7.23% so far this year and was up about 8.57% in the last one year (as of 11/12/2024). In that past 52-week period, it has traded between $87.76 and $111.94.

The ETF has a beta of 1.41 and standard deviation of 30.61% for the trailing three-year period, making it a high risk choice in the space. With about 51 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Oil & Gas Exploration & Production ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IEO is a good option for those seeking exposure to the Energy ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Invesco Energy Exploration & Production ETF (PXE) tracks Dynamic Energy Exploration & Production Intellidex Index and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) tracks S&P Oil & Gas Exploration & Production Select Industry Index. Invesco Energy Exploration & Production ETF has $116.31 million in assets, SPDR S&P Oil & Gas Exploration & Production ETF has $2.59 billion. PXE has an expense ratio of 0.60% and XOP charges 0.35%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Zacks Investment Research

Motor fuel retailer Murphy USA Inc. MUSA announced third-quarter 2024 earnings per share of $7.20, which beat the Zacks Consensus Estimate of $6.64. The outperformance primarily reflects higher fuel margins.

However, the company’s bottom line fell from the year-ago adjusted profit of $7.69 due to tepid petroleum product sales.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Murphy USA’s operating revenues of $5.2 billion fell 9.6% year over year and missed the consensus mark by $362 million.

Revenues from petroleum product sales came in at $4.1 billion, well below our estimate of $4.5 billion and down 11.5% from the third quarter of 2023. On the other hand, merchandise sales, at $1.1 billion, rose 2.5% year over year but were $34.7 million below our estimate.

Murphy USA Inc. Price, Consensus and EPS Surprise

Murphy USA Inc. price-consensus-eps-surprise-chart | Murphy USA Inc. Quote

Key Takeaways

MUSA’s total fuel contribution fell 3.5% year over year to $404.2 million, as lower RIN contribution offset margin expansion. Moreover, total fuel contribution (including retail fuel margin plus product supply and wholesale results) came in at 32.6 cents per gallon, 5.5% lower than the third quarter of 2023.

Retail fuel contribution increased 13.5% year over year to $395.7 million as margins widened to 31.9 cents per gallon from 28.7 cents in the corresponding period of 2023. Retail gallons edged up 2% from the year-ago period to 1,239.3 million in the quarter under review and beat our estimate of 1,213.8 million. Volumes on an SSS basis (or fuel gallons per store) improved 1.4% from the third quarter of 2023 to 245.2 thousand.

Contribution from Merchandise increased 2.4% to $216.8 million on higher sales, which offset a marginal fall in unit margins from 20.1% a year ago to 20% in the third quarter of 2024. On an SSS basis, total merchandise contribution was up 1.2% year over year, primarily on the back of 6.1% higher nicotine margins. Meanwhile, merchandise sales increased 1.6% on an SSS basis, again due to an increase in nicotine sales.

The Zacks Rank #3 (Hold) company’s monthly fuel gallons rose 1.1% from the prior-year period, while merchandise sales decreased 2% on an average per store monthly basis.

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

Balance Sheet

As of Sept. 30, Murphy USA — which opened four new retail locations in the quarter to take its store count to 1,740 — had cash and cash equivalents of $52.5 million and long-term debt (including lease obligations) of $1.8 billion, with a debt-to-capitalization of 68.7%.

During the quarter, MUSA bought back shares worth $126.4 million.

Some Key Refining Earnings

While we have discussed MUSA’s third-quarter results in detail, let’s see how some other refining companies have fared this earnings season.

Valero Energy VLO reported third-quarter 2024 adjusted earnings of $1.14 per share, which missed the Zacks Consensus Estimate of $1.29 due to the significant decline in refining throughput volumes. Adjusted operating income in the Refining segment totaled $565 million, down from $3.4 billion in the year-ago quarter. The figure also missed our estimate of $1.8 billion.

Valero’s total cost of sales decreased to $32.1 billion from the year-ago figure of $34.6 billion. The figure is also below our estimate of $33 billion, primarily due to lower cost of materials and operating expenses. The third-quarter capital investment totaled $429 million, of which $338 million was allotted for sustaining the business.

Another refining giant Phillips 66 PSX reported third-quarter 2024 adjusted earnings of $2.04 per share, which beat the Zacks Consensus Estimate of $1.63. However, the bottom line was lower than the year-ago quarter’s level of $4.63. The better-than-expected quarterly results can be primarily attributed to cost reduction and the achievement of Midstream synergy targets. However, this was partially offset by reduced contributions from PSX’s Refining segment due to a decline in realized margins.

Phillips 66 generated $1.13 billion of net cash from operations for the reported quarter, significantly lower than $2.69 billion a year ago. The company’s capital expenditure and investments totaled $358 million. It paid out dividends of $477 million in the third quarter. As of Sept. 30, 2024, cash and cash equivalents were $1.6 billion. Total debt was $19.9 billion, reflecting a debt-to-capitalization of 39.6%.

Finally, we have Marathon Petroleum’s MPC third-quarter third-quarter adjusted earnings per share of $1.87, which comfortably beat the Zacks Consensus Estimate of 97 cents. The outperformance primarily reflects the stronger-than-expected performance of its Refining & Marketing segment. Operating income of the segment totaled $298 billion, surpassing the consensus mark, calling for a loss of $64 million on the back of strong product sales and throughput.

Marathon Petroleum’s total refined product sales volumes were 3,685 thousand barrels per day (mbpd), up from 3,596 mbpd in the year-ago quarter. Throughput rose marginally from 2,959 mbpd in the year-ago quarter to 2,991 mbpd and outperformed the Zacks Consensus Estimate of 2,852 mbpd. MPC’s operating costs per barrel increased from $5.14 in the year-ago quarter to $5.30.

Zacks Investment Research