How Marathon Petroleum Stock Performed before 4Q17 Earnings



Marathon Petroleum stock performance

Since October 2, 2017, the beginning of the fourth quarter, Marathon Petroleum (MPC) stock has risen 28%. Also, peer stocks have increased. Let’s look at what led to the rise in MPC.

Marathon Petroleum stock has risen steeply, likely because of MPC’s 3Q17 earnings, which surpassed Wall Street analysts’ earnings estimate. Pre-earnings (from October 2 to October 26), Marathon Petroleum stock rose just 2.5%. However, post-earnings (since October 26),Marathon Petroleum stock has risen steeply by 24.7%, likely due to better-than-expected earnings. Also, MPC is successfully restructuring the organization with activities culminating mostly in 1Q18. This move could unlock potential value in the company for shareholders. Plus, tax rate changes are expected to impact MPC’s financials positively.

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However, in the fourth quarter, MPC’s refining earnings indicator, the blended LLS 6-3-2-1 crack, has fallen quarter-over-quarter, which could result in lower refining earnings QoQ for MPC in 4Q17. The decline in refining indicators is because it’s normalizing after experiencing extraordinarily high growth in the previous quarter, 3Q17, led by Hurricane Harvey. However, year-over-year, refining indicators have risen, as we discussed in the previous part of this series.

Also, EIA (U.S. Energy Information Administration) has reported a rise in gasoline inventory levels for the week ending January 5, 2018, compared to the week ending September 29, 2017. Also, distillate inventory levels have risen.

Overall, Marathon Petroleum stock has risen since October 2 due to better-than-expected earnings, a restructuring exercise ending soon, and tax reforms partially—offset by a quarter-over-quarter fall in refining earnings indicators and a rise in fuel inventories.

Peers’ stock performance

Since October 2, MPC’s peers Phillips 66 (PSX), Andeavor (ANDV), and Valero Energy (VLO) have risen 14%, 15%, and 26%, respectively. However, HollyFrontier (HFC) stock has risen even more sharply, by 46%.

Likewise, the SPDR S&P 500 ETF (SPY) has risen by 10.1%. So Marathon Petroleum stock, with its 28% gain, has outperformed SPY.

Read on to the next part of this series to see where MPC’s moving averages stand pre-earnings.


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