1Q16 estimated and actual performance
Marathon Petroleum (MPC) is expected to post its 2Q16 results on July 28, 2016. But before we look at those estimates, let’s recap the company’s 1Q16 performance compared to the estimates.
In 1Q16, Marathon Petroleum posted revenues of $12.8 billion, which surpassed Wall Street analyst estimates. However, after adjusting EPS (earnings per share) for inventory valuation and goodwill impairment charges, adjusted EPS stood at $0.06. That was ~59% lower than the estimated EPS of $0.15. Also, posted EPS was 96% lower than the company’s 1Q15 adjusted EPS.
Marathon Petroleum’s (MPC) net income fell from $891 million in 1Q15 to $1 million in 1Q16. This was due to a fall in operating income of its refining segment, partly offset by a rise in income from its midstream segment.
Income from the Speedway (or marketing) segment fell marginally. There was also a charge of $15 million in 1Q16 due to lower cost or market inventory valuation. The company also recorded a goodwill impairment charge of $129 million by MPLX, an MPC-sponsored MLP.
MPC’s 2Q16 estimates
According to Wall Street analyst estimates, MPC is expected to post EPS of $1 in 2Q16. That’s 31% lower than 2Q15 adjusted EPS but quite higher than 1Q16 adjusted EPS. MPC’s revenues are estimated to be around $16.6 billion in 2Q16, which is 19% lower than 2Q15 revenues.
In 2Q16, MPC’s refining earnings are likely to be higher compared to 2Q15. That’s because the blended LLS (Light Louisiana Sweet) crack spread, the sweet-sour differential, and the LLS-WTI (West Texas Intermediate) spread have risen. We’ll take a closer look at this in the next part of the series.
However, year-over-year, MPC is expected to decline in earnings. MPC’s peers Tesoro (TSO), HollyFrontier (HFC), and Phillips 66 (PSX) are expected to post 59%, 69%, and 41% lower EPS, respectively, in 2Q16 compared to 2Q15.
The Vanguard Energy ETF (VDE) has ~8% exposure to refining sector stocks.