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Marathon Petroleum (MPC) Swings to Q1 Loss, Revenues Miss

Nilanjan Choudhury

Independent oil refiner and marketer Marathon Petroleum Corporation MPC reported weak first-quarter results on declining crude discounts.

The company reported adjusted loss per share of 9 cents. The Zacks Consensus Estimate was for a profit of a penny, while in the year-ago period the company earned 8 cents per share.

Marathon Petroleum’s revenues of $28.6 billion came below the Zacks Consensus Estimate of $29.1 billion but improved 50.7% year over year on growing throughput volumes.

Marathon Petroleum Corporation Price, Consensus and EPS Surprise

 

Marathon Petroleum Corporation Price, Consensus and EPS Surprise | Marathon Petroleum Corporation Quote

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Segmental Performance

Refining & Marketing: The Refining & Marketing segment reported operating loss of $334 million compared with loss of $133 million in the year-ago quarter. The deterioration reflects narrower crude differentials, in addition to lower gasoline margins. This more than offset the impact of higher refining margins and rising throughputs following the 2018 acquisition of Andeavor.

Specifically, refining margin of $11.17 per barrel increased versus $10.58 a year ago. Total refined product sales volumes were 3,669 thousand barrels per day (mbpd), up from the 2,261 mbpd in the year-ago quarter. Moreover, throughput increased from 1,905 mbpd in the year-ago quarter to 3,084 mbpd following the addition of the legacy Andeavor refineries.Capacity utilization during the quarter was 95%.

Retail: Income from the Retail segment totaled $170 million, up 78.9% from the year-ago period. Apart from strong performance at Marathon Petroleum’s former Speedway unit, the segment results were buoyed by contribution from the acquired retail assets of Andeavor. Across the board, the Retail segment benefitted from higher fuel margins and merchandise sales. In particular, the company's retail fuel margin rose from 15.61 cents per gallon in the first quarter of 2018 to 17.15 cents per gallon in the quarter under review.

Midstream: This unit mainly reflects Marathon Petroleum’s the general partner and majority limited partner interests in MPLX LP MPLX and Andeavor Logistics LP ANDX - publicly-traded master limited partnerships that own, operate, develop and acquire pipelines and other midstream assets. Incidentally, MPLX just announced an agreement to acquire Andeavor Logistics in a deal worth around $9 billion.

Segment profitability was $908 million, up from $567 million in the first quarter of 2018. Earnings were buoyed by the addition of Andeavor Logistics results that contributed $220 million during the quarter. The unit was further aided by strong overall growth from all businesses that added $121 million to segment results.

Total Expenses

Marathon Petroleum – which spun off from Marathon Oil Corporation MRO in 2011 – reported expenses of $27.9 billion in first-quarter 2019, 50.7% higher than the year-ago quarter.

Capital Expenditure, Balance Sheet & Share Repurchase

In the reported quarter, the Zacks Rank #3 (Hold) Marathon Petroleum spent $1.3 billion on capital programs (62% on the Midstream segment). As of Mar 31, the company had cash and cash equivalents of $877 million and total debt of $28.1 billion, with a debt-to-capitalization ratio of 39.6%.

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

During the first quarter, Marathon Petroleum returned $1.2 billion of capital to shareholders, including $885 million in share buybacks.

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