Ohio-based independent oil refiner and marketer, Marathon Petroleum Corp. (MPC) reported strong third-quarter results, owing to higher product price realization and improved crack spread.
The company reported earnings per share of $2.42 (excluding expenses related to pension settlement), which surpassed the Zacks Consensus Estimate of $2.34.The bottom line also improved substantially from the year-ago period adjusted profit of 59 cents.
However, revenues of $25,481 million missed the Zacks Consensus Estimate of $26,710 million. The top line also decreased from the year-ago figure of $26,274 million.
Segmental Performance
Refining & Marketing: The unit earned $971 million in the reported quarter compared with profits of $227 million in the year-ago quarter. Higher realization of product prices and increased crack spread in the U.S. Gulf Coast and Chicago led to the improvement.
Total refined product sales volumes remained same year over year at 2,155 thousand barrels per day. Throughput improved marginally from 1,877 thousand barrels per day in the year-ago quarter to 1,880 thousand barrels per day.
Speedway: Income from the Speedway retail stations totaled $119 million, up from $102 million in the year-ago period. Improved margins from light products and margins aided the results.
Pipeline Transportation: Segment profitability was $69 million, up from $54 million in the third quarter of 2013. Earnings were propped up by higher transportation revenues and improved equity affiliate earnings. However, it was partially offset by increased operating expenses.
Capital Expenditure, Balance Sheet & Share Repurchase
In the reported quarter, Marathon Petroleum spent $3,278 million on capital programs (82.6% on Speedway owing to the acquisition of Hess Corporation’s (HES) retail operations). As of Sep 30, 2014, the company had cash and cash equivalents of 1,854 million and total debt of $6,264 million, with a debt-to-capitalization ratio of 36%.
During the reported quarter, Marathon Petroleum repurchased shares worth $301 million.
Strategic Update
Marathon Petroleum announced that it intends to increase the growth rate of its affiliate, MPLX LP (MPLX). To further this, the company declared the sale of its remaining 31% stake in MPLX Pipe Line Holdings LP to the affiliate. MPLX is expected to increase its annual distribution growth rate to the mid-20s in the next five year period.
Zacks Rank
Marathon Petroleum currently carries a Zacks Rank #3 (Hold).
Meanwhile, one could consider better-ranked players from the same industry like Murphy USA Inc. (MUSA) that currently sports a Zacks Rank #1 (Strong Buy).
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