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Will Marathon Petroleum See Strong 3Q17 Results?

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Will Marathon Petroleum See Strong 3Q17 Results? PART 1 OF 7

Marathon Petroleum’s 3Q17: Reading the Expectations

2Q17 performance and estimates

Marathon Petroleum (MPC) is expected to report its 3Q17 results on October 26, 2017. Before we proceed with the 3Q17 estimates, let’s recap MPC’s 2Q17 performance versus estimates.

In 2Q17, Marathon Petroleum (MPC) posted revenues of $18.4 billion, which missed the Wall Street analysts’ estimates. MPC’s adjusted EPS (earnings per share) for 2Q17 stood at $1.03, missing the estimated EPS of $1.07. MPC’s 2Q17 EPS stood 4% lower than its 2Q16 EPS.

Marathon Petroleum’s 3Q17: Reading the Expectations

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Marathon Petroleum’s net income fell in 2Q17 on a YoY (year-over-year) basis due to a decline in the operating income of its Refining segment. The fall was partially offset by the increase in MPC’s operating earnings in its Midstream and Speedway (or retail) segments.

After its 2Q17 earnings release, MPC announced that it had revised its 2Q17 numbers to reflect a $86 million payment related to some litigation matters, subject to court approval.

Marathon Petroleum’s 3Q17 estimates

MPC is expected to post an EPS of $1.4 in 3Q17, which would be ~36% higher than its 2Q17 EPS. Its 3Q17 estimated EPS is expected to be a whopping 142% higher than its 3Q16 adjusted EPS, and its revenues are estimated to be ~$19.1 billion in 3Q17—16% higher than its 3Q16 revenues.

In 3Q17, MPC’s refining earnings indicators point to higher refining earnings over 3Q16. MPC’s blended LLS (Louisiana light sweet) crack and the LLS-WTI spread have widened YoY in 3Q17, but the sweet-sour differential has diminished.

Meanwhile, RIN (renewable identification number) expenses, adjusted for gasoline differential, have risen in 3Q17 over 3Q16, and such expenses heavily impact MPC’s refining earnings.

Expectations from peers

Valero Energy (VLO), Andeavor (ANDV), and Phillips 66 (PSX) are expected to post 35%, 91%, and 57% higher EPS, respectively, in 3Q17 YoY. HollyFrontier’s (HFC) 3Q17 estimated EPS is 126% higher than its 3Q16 adjusted EPS. PBF Energy (PBF) is expected to post positive EPS in 3Q17, compared with its negative EPS in 3Q16.

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