Marathon Petroleum (MPC) Q1 Earnings Miss On Lower Margins

Independent oil refiner and marketer Marathon Petroleum Corporation (NYSE:MPC) reported weaker-than-expected first-quarter results on lower fuel margin and declining income from its retail division. The company’s earnings per share came in at 8 cents, well below the Zacks Consensus Estimate of 14 cents. Specifically, refining margin of $10.58 per barrel decreased versus $11.65 a year ago.

However, earnings improved from the year-ago period's bottom-line figure of 6 cents on the back of strength in Marathon Petroleum’s midstream segment.

Marathon Petroleum’s revenues of $18,984 million came below the Zacks Consensus Estimate of $22,390 million but improved 15.8% year over year.

Segmental Performance

Refining & Marketing: Operating loss from the Refining & Marketing segment was $133 million compared with $70 million in the year-ago quarter. The wider loss reflects assets dropdowns to its midstream subsidiary.

Total refined product sales volumes were 2,275 thousand barrels per day (mbpd), up from the 2,085 mbpd in the year-ago quarter. Moreover, throughput improved from 1,708 mbpd in the year-ago quarter to 1,905 mbpd.Capacity utilization, at 93%, was up from 83% in the first quarter of 2017.

Speedway: Income from the Speedway retail stations totaled $95 million, down 29.6% from the year-ago period. The segment results were impacted by decline in light product margins, higher operating expense, accelerated depreciation and reduced footfall at the stores due to multiple storms in the Northeast and Midwest markets.

Midstream: This unit includes Marathon Petroleum’s 100% interest in MPLX L.P. (NYSE:MPLX) , a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.

Segment profitability was $567 million, up from $309 million in the first quarter of 2017. Earnings were buoyed by strength in volumes gathered, processed and fractionated. The unit was further aided by the addition of refining logistics assets and fuels distribution services from sponsor Marathon Petroleum.

Total Expenses

Marathon Petroleum – which spun off from Marathon Oil Corp. (NYSE:MRO) in 2011 – reported expenses of $18,544 million in first-quarter 2018, 15.2% higher than the year-ago quarter.

Capital Expenditure, Balance Sheet & Share Repurchase

In the reported quarter, Zacks Rank #3 (Hold) Marathon Petroleum spent $748 million on capital programs (64% on the Midstream segment). As of Mar 31, the company had cash and cash equivalents of $4,653 million and total debt of $17,258 million, with a debt-to-capitalization ratio of 46%.

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

During the quarter under review, Marathon Petroleum returned $1,550 million of capital to shareholders, including $1,330 million in share repurchases.

Andeavor Acquisition

Yesterday, Marathon Petroleum announced that it has agreed to buy rival Andeavor (NYSE:ANDV) for $23.3 billion. Should the deal go through, it will create the largest independent American oil refiner by capacity.

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