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Why Has Marathon Petroleum Stock Underperformed SPY in 1Q18?



Marathon Petroleum’s stock performance

Since January 2, 2018, Marathon Petroleum (MPC) stock has risen 0.7%, underperforming the SPDR S&P 500 ETF (SPY), the overall market indicator. The ETF has risen 1.5% in the same period.

Contrarily, MPC’s peers have fallen. Valero Energy (VLO) has fallen 0.8% since January 2. Andeavor (ANDV) and Phillips 66 (PSX) have also slumped 15.7% and 7.4%, respectively, so far in the first quarter.

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Marathon Petroleum stock rises marginally in 1Q18

Marathon Petroleum stock has risen slightly in 1Q18. This rise has likely been the result of MPC’s 4Q17 earnings, which surpassed Wall Street analysts’ earnings estimates.

However, the broader market has been quite volatile in 1Q18. Though SPY has risen so far in the quarter, it had a weaker February than January. In January, the broader market rose 4.9%, but it fell 3.5% in February. However, in March so far, SPY has risen 1.9%. 

Similar to SPY, MPC stock rose 3.1% in January, fell 6.7% in February, and rose 4.5% in March. These movements imply that Marathon Petroleum stock has mostly moved in line with the broader market. However, the steep fall in MPC stock in February has resulted in only a marginal rise in Marathon Petroleum stock in 1Q18 so far.

Thusfar in 1Q18, MPC’s refining earnings indicators, the blended LLS 6-3-2-1 crack and the LLS-WTI (Louisiana Light Sweet–West Texas Intermediate) spreads, have fallen quarter-over-quarter. However, the sweet-sour differential has risen quarter-over-quarter in 1Q18. Thus, the fall in the blended crack and LLS-WTI spreads could be partly offset by the rise in the sweet-sour differential. This could result in weaker refining earnings for MPC in 1Q18.

Also, the EIA (U.S. Energy Information Administration) has reported a rise in gasoline inventory levels for the week ended March 2, 2018, compared to the week ended December 29, 2017. However, distillate inventory levels have reduced in the same period.

In short. . .

Marathon Petroleum stock has risen marginally in 1Q18 quarter-to-date, likely due to better-than-expected earnings but partially offset by volatility in the broader market, weaker refining earnings indicators, and a rise in gasoline inventories in the industry.

In the next article, we’ll review MPC’s moving averages.


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