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Marathon Petroleum’s Earnings Beat Estimates

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Marathon Petroleum (MPC) posted its second-quarter results on August 1. In the second quarter, Marathon Petroleum’s earnings per share stood at $1.66, about 27% lower YoY (year-over-year). However, adjusting for special items, Marathon Petroleum’s earnings reached $1.73 per share, higher than analysts’ estimate of $1.32 per share.

The company’s second-quarter revenue rose 50% YoY to $33.7 billion, higher than analysts’ estimate of $33.4 billion. However, MPC’s adjusted earnings per share fell 24% YoY in the second quarter.

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Marathon Petroleum’s earnings review

Marathon Petroleum’s earnings rose 11% YoY to $1.367 billion in the second quarter, driven by an increase in its operating profits. In addition, the company’s operating earnings rose 19% YoY to $2.0 billion in the quarter. MPC’s operating earnings rose due to higher Retail and Midstream earnings, partly offset by lower Refining (Refining and Marketing) earnings.

Marathon Petroleum’s Retail operating income rose 210% YoY in the second quarter, driven by better fuel and merchandise margins and the merger of Andeavor’s retail assets. Marathon Petroleum’s earnings in its Midstream segment also rose 42% YoY in the second quarter, boosted by the earnings from Andeavor Logistics.

Further, Marathon Petroleum’s earnings in its Refining segment fell 12% YoY. The decrease resulted from lower refining margins driven by weaker oil spreads. However, MPC’s throughputs rose due to the addition of Andeavor’s refining assets.

Marathon Petroleum’s earnings impacted by refining margin

Marathon Petroleum’s (MPC) gross refining and marketing margin fell $0.20 per barrel YoY to $15.20 per barrel in the second quarter. Its peer Valero Energy’s (VLO) refining margin declined 14% YoY to $9.60 per barrel in the quarter. Also, Phillips 66’s (PSX) refining margin fell $0.90 per barrel YoY to $11.40 per barrel in the second quarter.

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Marathon Petroleum’s rising synergies

Marathon Petroleum’s earnings for its Midstream and Retail segments rose due to the acquisition and integration of Andeavor’s assets. As a result, this acquisition led to a vast network, higher capacities, and massive synergies from operations. The company realized $270 million of synergies in the second quarter.

Marathon Petroleum’s chairman and CEO, Gary R. Heminger, noted in the company’s second-quarter release, “Combined with our first quarter results, we have realized $403 million of synergies year to date. Our progress gives us great confidence in achieving our target of up to $600 million of annual gross run-rate synergies by year-end 2019 and $1.4 billion by the end of 2021.”

Peers’ performances

Marathon Petroleum’s peer Phillips 66’s earnings rose 8% YoY in the second quarter. Also, Phillips 66’s adjusted EPS of $3.02 beat analysts’ mean estimate of $2.74. To learn more, read Phillips 66’s Earnings Surprise: EPS Rise, Beat Estimate.

Valero Energy’s (VLO) earnings fell 30% YoY to $1.50 per share in the second quarter. Valero stock slumped 3.2% on its earnings release day.

Analysts expect Delek US Holdings’ (DK) EPS to fall 38% YoY in the quarter.

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