Executive Summary:
Marathon Petroleum Corporation is a leading, integrated, downstream energy company headquartered in Findlay, Ohio. MPC’s marketing system includes branded locations across the United States, including Marathon brand retail outlets. This midstream company owns and operates gathering, processing, and fractionation assets, as well as crude oil and light product transportation and logistics infrastructure. Marathon Petroleum is an independent company, which engages in refining, marketing, and transportation of petroleum products in the United States.
Marathon Petroleum Corporation reported net income attributable to MPC of $622 million, or $1.87 per diluted share, compared with net income attributable to MPC of $3.3 billion, or $8.28 per diluted share. Revenue for the quarter came in at $33.2 billion, also falling short of analyst estimates of $33.4 billion.
Stock Overview:
| Ticker | $MPC | Price | $140.53 | Market Cap | $45.16B |
| 52 Week High | $221.11 | 52 Week Low | $130.54 | Shares outstanding | 321.39M |
Company background:
Marathon Petroleum Corporation is a major player in the U.S. energy industry, specializing in refining, marketing, and transporting petroleum products. Its roots trace back to 1887 with the founding of The Ohio Oil Company. Headquartered in Findlay, Ohio, Marathon Petroleum operates a vast network, including 13 refineries with a combined capacity of approximately 2.9 million barrels per day.
The company’s product portfolio encompasses a wide range of refined fuels, such as gasoline, diesel, jet fuel, and heating oil. It also produces petrochemicals and other specialty products. Marathon Petroleum’s marketing arm boasts a presence, with a network of branded retail outlets across the United States under the Marathon brand. It owns a substantial stake in MPLX LP, a midstream company that handles crucial aspects of the energy supply chain, including gathering, processing, and transporting crude oil and refined products.
Marathon Petroleum operates in a highly competitive landscape, facing challenges from other major refining and marketing companies. Key competitors include names like Valero Energy, Phillips 66, and ExxonMobil. These companies vie for market share in refining capacity, product distribution, and retail sales. The industry is subject to various factors, including fluctuating crude oil prices, government regulations, and environmental concerns.
Its integrated operations, extensive infrastructure, and strong brand recognition provide a solid foundation for continued growth and success. The company’s ability to adapt to evolving market dynamics and navigate challenges will be crucial in shaping its future trajectory.
Recent Earnings:
Marathon Petroleum Corporation reported net income attributable to MPC of $622 million, or $1.87 per diluted share, a decline from the $3.3 billion, or $8.28 per diluted share, reported in the same period of 2023. The projected earnings of $2.03 per share. Revenue for the quarter reached $33.2 billion, slightly below analyst estimates of $33.4 billion.
Crack spreads, which measure the difference between the price of crude oil and the price of refined products, play a crucial role in refining profitability. Additionally, planned refinery turnarounds during the quarter contributed to higher operating costs. The company returned $3.2 billion of capital to shareholders through share repurchases and dividends. Looking ahead, Marathon Petroleum emphasized its commitment to its long-term strategy, which includes optimizing its refining operations, enhancing its marketing and logistics capabilities.
The Market, Industry, and Competitors:
Marathon Petroleum Corporation (MPC) operates primarily in the downstream energy sector, focusing on refining, marketing, and transporting petroleum products. The company has a robust presence in the United States, with several refineries located mainly in the Gulf Coast and Midwest regions. MPC’s business model is structured around three main segments: Refining & Marketing, Retail, and Midstream operations. This diversified approach allows the company to effectively manage the supply chain from crude oil processing to retail distribution, including the operation of convenience stores under its Speedway brand.
The company aims to reduce its absolute Scope 3 greenhouse gas emissions by 15% below 2019 levels by 2030, reflecting a broader industry trend towards environmental responsibility. The global refined petroleum products market, in which MPC is a key player, is projected to grow at a compound annual growth rate (CAGR) of approximately 4–5.1% from 2024 to 2030, reaching an estimated market size of $957.48 billion by 2030. This growth is driven by increasing energy demand, particularly in emerging markets, and the ongoing transition towards cleaner energy solutions.
Unique differentiation:
Marathon Petroleum Corporation faces stiff competition from several major players in the U.S. downstream energy market. Key rivals include companies like Valero Energy, Phillips 66, and ExxonMobil. These competitors vie for market share in refining capacity, product distribution, and retail sales.
The competitive landscape is characterized by factors such as fluctuating crude oil prices, government regulations, and environmental concerns. Companies must continually adapt to changing market conditions, invest in technological advancements, and optimize their operations to maintain a competitive edge.
The presence of these strong competitors necessitates a focus on operational efficiency, cost control, and strategic investments in areas like renewable energy and low-carbon technologies. Marathon Petroleum, like its competitors, must navigate the evolving energy landscape while striving to maintain profitability and shareholder value.
Largest Refining System: MPC boasts the largest refining system in the United States, providing significant economies of scale and operational flexibility. This extensive network allows for efficient production and distribution of refined products.
Integrated Operations: MPC’s integrated business model, encompassing refining, marketing, and midstream operations, provides a competitive advantage. This integration enables optimized logistics, cost control, and a more stable supply chain.
Midstream Strength: Through its ownership stake in MPLX LP, MPC benefits from a robust midstream infrastructure, facilitating the efficient transportation and logistics of crude oil and refined products.
Management & Employees:
Maryann T. Mannen: President and Chief Executive Officer
Timothy J. Aydt: Executive Vice President, Refining
James R. Wilkins: Senior Vice President, Health, Environment, Safety and Security
Ehren D. Powell: Chief Digital Officer and Senior Vice President
Financials:
Marathon Petroleum Corporation (MPC) has reported total revenues of approximately $149.35 billion, a decline of 16.21% from 2022, reflecting the volatility in crude oil prices and refining margins. The company’s revenue for the trailing twelve months (TTM), was $142.67 billion, indicating a further decrease of 6.59% year-over-year.
MPC’s net income was reported at $1.5 billion, down from $3.3 billion in the same quarter of 2022. The earnings per diluted share for this period were $3.84, compared to $7.09 a year earlier. The adjusted EBITDA for 2023 was around $14.1 billion, showcasing strong operational performance despite lower revenues. MPC’s earnings growth has been impacted by fluctuating refining margins and operational costs, resulting in a compound annual growth rate (CAGR) that reflects these challenges.
The company returned approximately $12.8 billion to shareholders through dividends and share repurchases, emphasizing its commitment to delivering value despite revenue fluctuations. The company’s liquidity remains robust, supported by strong cash flow generation capabilities that enable it to navigate periods of market volatility effectively. MPC’s market capitalization stood at around $45.88 billion, indicating its substantial presence in the energy sector and investor confidence in its long-term prospects.
While Marathon Petroleum Corporation has faced headwinds in revenue and earnings over the last five years, its strategic focus on operational excellence and shareholder returns positions it well for future growth as market conditions stabilize and evolve towards cleaner energy solutions. The company’s ability to adapt to changing industry dynamics will be crucial for sustaining its performance and achieving long-term objectives in the competitive energy landscape.
Technical Analysis:
The stock is in a stage 4 markdown (bearish) on the monthly chart and weekly. The daily chart shows a reversal in the works with a support in the $130 range, however this should result in a retest back to the $130 – $135 range. The stock should head lower to test that in the short term.
Bull Case:
Increased Demand for Refined Products: Continued economic growth and global energy demand could lead to higher demand for refined products, benefiting MPC’s refining and marketing operations.
Operational Efficiency: MPC’s focus on operational excellence, including cost control and technological advancements, could enhance its profitability and competitiveness.
Shareholder Returns: The company’s commitment to returning capital to shareholders through dividends and share repurchases could boost investor confidence and drive stock appreciation.
Bear Case:
Declining Refining Margins: A significant risk is a sustained decline in refining margins. These margins fluctuate significantly based on the price of crude oil and the demand for refined products. If margins narrow or weaken, MPC’s profitability will likely suffer.
Regulatory and Environmental Pressures: The energy industry faces increasing regulatory scrutiny and environmental pressures. Stricter regulations on emissions, fuel standards, and environmental protection could increase costs and hinder profitability.
Transition to Renewable Energy: The growing adoption of renewable energy sources, such as electric vehicles, could reduce the long-term demand for traditional petroleum products, impacting MPC’s core business.
