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Analysts’ Opinions on Marathon Petroleum: Why Are They Positive?

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Sep. 7 2017, Updated 9:07 a.m. ET

Analysts’ opinions on MPC

Marathon Petroleum (MPC) is analyzed by 19 Wall Street analysts. The analyst rating chart below shows that 18 (or 95.0%) of them rated MPC a “buy” in September 2017. Only one analyst rated it a “hold.” Compared to September 2016, MPC’s ratings have strengthened with more “buy” ratings.

MPC’s mean price target of $64 per share implies an 18.0% rise from the current level. Recently, Cowen and Company raised MPC’s target price from $55 per share to $60 per share. The firm has an “outperform” rating on MPC stock.

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Analyst ratings for peers

MPC’s peers Phillips 66 (PSX), Valero Energy (VLO), and Andeavor (ANDV) have been rated a “buy” by 32.0%, 52.0%, and 82.0% of analysts, respectively. Delek US Holdings (DK), PBF Energy (PBF), and HollyFrontier (HFC) have been rated a “buy” by 27.0%, 29.0%, and 29.0% of analysts, respectively.

Why higher “buy” ratings for Marathon Petroleum?

MPC intends to restructure itself to unlock value in the company. The restructuring plan broadly includes a drop-down of midstream assets to MPLX (MPLX), its MLP, an exchange of its economic interest in its GP (general partner), IDRs (incentive distribution rights) for its new MPLX shares, and the separation of its Speedway or retail segment. To know more about IDRs, please refer to IDRs: How Do They Impact MLPs?

MPC has already started working on this restructuring by executing drop-downs in 1Q17. In the first quarter, MPC dropped down some pipelines, terminals, and storage assets to MPLX (MPLX) for $2.0 billion. The company executed another drop-down in the current quarter, or 3Q17, which we covered in the first part of this series. The Speedway separation evaluation is underway and is likely to be finished in 3Q17. The exchange of IDRs and the drop-downs of midstream assets are likely to be completed by 1Q18.

The completion of the restructuring exercise could result in an upsurge in MPC’s valuation, which could be why the majority of analysts rate the company a “buy.”

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