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Marathon Petroleum Stock Faces Downgrade and Target Cuts

Maitali Ramkumar - Author

May 29 2019, Published 12:16 p.m. ET

Marathon Petroleum

Marathon Petroleum (MPC) is covered by 17 analysts. Among the analysts, 16 or 94% recommended a “buy” or “strong buy” rating on the stock. The company also has one “hold” rating.

Recently, Cowen and Company downgraded Marathon Petroleum stock from “outperform” to “market perform.” The firm cut its target price on Marathon Petroleum stock from $90 to $65. Credit Suisse cut its target price on Marathon Petroleum stock from $95 to $80. Simmons Energy lowered its target price on the stock from $72 to $65. Marathon Petroleum’s mean target price of $83 per share implies an ~60% gain from the current level.

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Most analysts are positive

In the first quarter, Marathon Petroleum’s earnings grew in the retail and midstream segment due to integrating Andeavor’s assets. The company is confident about achieving its stated synergies in upcoming quarters. Marathon Petroleum continued to focus on its capex to achieve its targeted incremental EBITDA. Marathon Petroleum has ongoing projects to modernize its refining segment, enlarge its midstream segment, and expand footprints in the marketing segment.

However, in the first quarter, Marathon Petroleum posted a refining operating loss. The first quarter is usually a weaker period for refiners. Marathon Petroleum’s peers also saw a decline in their refining earnings in the first quarter.

Phillips 66’s (PSX) refining earnings fell to -$219 million in the first quarter due to weaker refining margins. Valero Energy’s (VLO) refining earnings fell 41% YoY to $479 million in the first quarter due to its weaker refining margin and lower throughput. HollyFrontier’s (HFC) refining segment’s adjusted EBITDA fell 4% to $193 million in the first quarter. Phillips 66, Valero Energy, and HollyFrontier have been rated as a “buy” by 67%, 79%, and 18% of the analysts, respectively.

Analysts might be positive on Marathon Petroleum stock due to expected synergies, its integrated earnings model, and growth activities.


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