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Why MPC Stock Fell despite Earnings Beat

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  • MPC stock fell 1.8% on Thursday—its earnings release day.
  • The weaker equity market and turmoil in oil prices impacted Marathon Petroleum stock.
  • Better-than-expected EPS and growth updates prevented a steep fall in Marathon Petroleum stock.

MPC stock performed in line with the equity market and its peers on Thursday. The SPDR S&P 500 ETF (SPY), which represents the S&P 500 Index, fell 0.9%. To learn more, read Trump Says He Saved the US Economy from ‘A Great Recession.’

Valero Energy (VLO) and Phillips 66 (PSX) fell 1.1% and 0.6%, respectively, on Thursday. Valero Energy and Phillips 66’s second-quarter earnings beat analysts’ estimate. Delek US Holdings (DK) stock fell 10.1%. Analysts expect Delek’s EPS to fall 38% YoY (year-over-year) in the second quarter. WTI fell 7.9% on Thursday.

Growth updates supported MPC stock

Marathon Petroleum’s capex rose from $0.9 billion in the second quarter of 2018 to $1.4 billion in the second quarter. The capex rose due to the inclusion of Andeavor’s capex. Marathon Petroleum spent $0.4 billion towards the Refining and Marketing segment, $0.8 billion towards the Midstream segment, and rest towards the Retail segment and corporate and others.

Marathon Petroleum combined its MPLX and Andeavor Logistics assets to create an integrated value chain from the Permian Basin to the US Gulf Coast. MPLX also took the final investment decision to move ahead with the Whistler natural gas pipeline. In the Retail segment, Speedway plans to convert 700 stores by the end of 2019. Marathon Petroleum is also growing its retail presence in Mexico. In the Refining segment, the company has undertaken activities to position itself favorably before IMO 2020. The company completed its Garyville crude revamp project in the second quarter.

Stock forecast for the next eight days

MPC stock fell on its earnings day. We’ll estimate Marathon Petroleum’s stock price range for the period ending August 9 based on its implied volatility.

Considering Marathon Petroleum’s implied volatility of 33.8% and assuming a normal distribution of prices and a standard deviation of one, the stock price could close between $58.1 and $52.6 per share in the eight days ending August 9.

Higher earnings supported the stock

A 19% YoY rise in operating earnings partly offset the fall in MPC stock. The company’s earnings grew due to higher retail and midstream earnings. However, Marathon Petroleum’s refining earnings fell in the second quarter.

Marathon Petroleum’s refining earnings fell 12% YoY to $906 million due to lower refining margins. The company’s gross refining and marketing margin fell by $0.2 per barrel YoY to $15.2 per barrel in the second quarter. However, the throughput rose due to the integration of Andeavor’s refining capacities. Marathon Petroleum’s throughputs rose from 2.0 MMbpd (million barrels per day) in the second quarter of 2018 to 3.1 MMbpd in the second quarter.

Marathon Petroleum’s operating income from the Retail segment rose 210% YoY to $493 million in the second quarter. The rise was due to the addition of Andeavor’s retail assets. Also, the higher retail fuel margin, merchandise margin, and merchandise sales supported the earnings.

The Midstream segment’s operating income rose 42% YoY to $878 million in the second quarter. The rise was due to the inclusion of earnings from Andeavor Logistics. The company saw higher terminal and pipeline throughputs and better processing, fractionating, and gathering volumes in the second quarter.

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