Marathon Petroleum’s Earnings Could Rise 25% in Q4 2018



Earnings estimates

We started this series by ranking the growth in refiners’ fourth-quarter earnings. In Part 1 and Part 2, we reviewed HollyFrontier (HFC) and Phillips 66 (PSX). They’re expected to post 144% YoY and 126% YoY higher EPS in the fourth quarter, respectively. In this part, we’ll discuss Marathon Petroleum’s (MPC) fourth-quarter earnings estimates.

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Marathon Petroleum’s fourth-quarter estimates

Marathon Petroleum is expected to post an EPS of $1.3 in the fourth quarter—25% higher than the EPS in the fourth quarter of 2017. The company’s estimated EPS in the fourth quarter is 21% lower than the adjusted EPS in the third quarter. Marathon Petroleum’s revenues are expected to be ~$32.2 billion in the fourth quarter—51% higher than its revenues in the fourth quarter of 2017.

Marathon Petroleum’s fourth-quarter earnings would include the impact of the Andeavor acquisition. The company closed the acquisition on October 1. The acquisition increased Marathon Petroleum’s refining capacities, midstream capabilities, and retail network.

Marathon Petroleum’s refining earnings are impacted by the sweet differential, the sour differential, and the blended crack. According to the company, a dollar per barrel rise in the blended crack expands its annual EBITDA by $1.150 billion. A dollar per barrel change in the sour differential and the sweet differential changes the company’s annual EBITDA by $570 million and $475 million, respectively.

The refining earnings indicators have put up a mixed trend in the fourth quarter. The blended crack has fallen by $1.4 per barrel YoY to $9.4 per barrel. However, the sour differential and the sweet differential have expanded. The company’s refining earnings could decrease in the fourth quarter due to narrower blended crack—partly offset by expanded differentials.

Next, we’ll discuss Valero Energy (VLO).


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