Marathon Petroleum Ranks Second with a 23% Implied Gain

MPC’s implied gain

In the previous article, we reviewed Delek US Holdings (DK), which has the highest implied gain among its peers based on Wall Street analysts’ mean target price.

Now let’s discuss the stock that’s expected to post the second-highest gain: Marathon Petroleum (MPC).

Marathon Petroleum Ranks Second with a 23% Implied Gain

MPC ranks second with a 23% implied gain based on its target price. The stock has risen 49% in the past year. Wall Street analysts’ mean target price for Marathon Petroleum stock has risen 57% in the same period.

MPC is one of the leading American refiners in the refining, midstream, and marketing segment. The company aims to build an integrated downstream earnings model that’s not just reliant on volatile refining earnings. In the second quarter, 40% of MPC’s operating earnings came from the nonrefining segment (namely midstream and marketing). Further, in the second quarter, MPC’s adjusted EPS rose 120% YoY (year-over-year) and surpassed estimates.

MPC’s earnings growth, valuation, and dividend yield

MPC has been growing on capex and acquisitions. The ongoing acquisition of Andeavor (ANDV) is expected to bring sharp growth in MPC’s capacities and earnings. Wall Street analysts expect MPC’s EPS to rise 35% to $5.2 in 2018. In the first half of 2018, MPC’s adjusted EPS stood at $2.31. MPC is trading at a forward PE of 12.1x, above the peer average of 10.8x.

Further, the company provides shareholder returns consistently in the form of dividends and share repurchases. In the second quarter, MPC bought $0.9 billion worth of shares and paid $0.2 billion worth of dividends, amounting to a total of $1.1 billion in shareholder returns. MPC’s current dividend yield stands at 2.3%, just below the peer average of 2.4%.

Overall, MPC has a high implied gain but comes with an above-average valuation and a below-average dividend yield.