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MPC’s EPS Are Expected to Rise while Peers’ EPS Are Likely to Fall

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Estimated performance of refiners

Marathon Petroleum (MPC) is expected to post a year-over-year rise in earnings in the first quarter. However, Phillips 66 (PSX), HollyFrontier (HFC), and Valero Energy’s (VLO) earnings are expected to fall YoY by 21%, 23%, and 56%, respectively, in Q1 2019.

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Marathon Petroleum’s first-quarter expectations

Marathon Petroleum is estimated to post EPS of $0.40 in Q1 2019, much higher than its Q1 2018 adjusted EPS of $0.04. However, Marathon Petroleum’s Q1 2019 estimated EPS is 82% lower than its Q4 2018 adjusted EPS of $2.22. MPC’s revenues are expected to be around $28.0 billion in Q1 2019, 48% higher than Q1 2018 revenues.

Marathon Petroleum’s first-quarter earnings will include the impact of Andeavor’s asset integration. MPC’s refining capacities, midstream capabilities, and the retail network have expanded due to the integration. The combination also boosted the company’s fourth-quarter earnings.

Plus, Marathon Petroleum’s refining earnings are affected by the sweet differential, the sour differential, and the blended crack. According to MPC, a dollar per barrel rise in the blended crack expands its annual net income by $900 million. Also, a dollar per barrel shift in the sour differential and the sweet differential alters its yearly net income by $450 million and $370 million, respectively.

Two of the three above-mentioned refining earnings indicators rose in Q1 2019. In the first quarter, the blended crack rose $0.6 per barrel year-over-year to $9.3 per barrel. Further, the prompt sweet differential widened by $2.7 per barrel YoY in the first quarter, which suggests that the company’s refining earnings could increase in the first quarter due to a larger blended crack and sweet differential partly offset by the narrower sour differential.

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