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Marathon Petroleum’s Strong 2Q Revenues Didn’t Help Its Earnings

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Marathon Petroleum’s 2Q16 performance

In 2Q16, Marathon Petroleum (MPC) posted revenues of $16.8 billion—this surpassed Wall Street analysts’ estimates. After adjusting its EPS (earnings per share) for inventory valuation, the adjusted EPS stood at $1.07—11% higher than the estimated EPS of $0.97. However, the company’s 2Q16 adjusted EPS is 29% lower than its 2Q15 EPS.

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Marathon Petroleum’s 2Q16 earnings fell YoY

Marathon Petroleum’s net income fell from $826 million in 2Q15 to $801 million in 2Q16. This was due to a fall in the operating income of its Refining segment. It was partly offset by a rise in income from its Midstream segment. The income from the Speedway (or marketing) segment also rose. There was a benefit of $385 million in 2Q16 due to lower cost or market inventory valuation. However, an impairment charge of $90 million was recorded by MPLX (MPC-sponsored master limited partnership).

Specifically, Marathon Petroleum posted a 9% YoY (year-over-year) fall in its Refining segment’s operating earnings. However, the Midstream and Speedway segments’ operating incomes rose by 95% and 52% YoY, respectively, in 2Q16. We’ll discuss Marathon Petroleum’s segmental 2Q16 performance in the next part of this series.

Marathon Petroleum’s peers such as Delek US Holdings (DK) and Alon USA Energy (ALJ) are expected to post losses in 2Q16. The PowerShares Dynamic Large Cap Value ETF (PWV) has an ~5% exposure to energy sector stocks.

In the next part, let’s look at a segmental analysis of Marathon Petroleum’s 2Q16 results.

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