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Marathon Petroleum’s Earnings Rise 49%, Beat Estimate

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Today, Marathon Petroleum (MPC) released results for the third quarter, during which its earnings rose 49% YoY (year-over-year) to $1.1 billion. The news came as a positive surprise for Wall Street, which had forecast a 15% YoY fall.

Marathon’s EPS rose 2% YoY to $1.66 in the third quarter. Its adjusted EPS fell 4% YoY to $1.63 but surpassed analysts’ estimate of $1.38. The company’s revenue rose 35% YoY to $31.0 billion, missing analysts’ forecast of $34.4 billion.

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Marathon Petroleum’s earnings review

Marathon’s earnings surged, led by an increase in its operating income. The company’s operating income climbed by 44% YoY to $2.0 billion in the quarter. The growth was due to an increase in earnings across its refining, retail, and midstream segments.

The company’s retail operating earnings rose 175%, boosted by wider fuel and merchandise margins and the integration of Andeavor’s retail assets. Additionally, the company’s midstream earnings rose 35% YoY in the third quarter, boosted by Andeavor Logistics’ earnings.

Marathon Petroleum’s earnings boosted by refining margin

Surprisingly, the company’s refining earnings grew 33% YoY to $883 million, supported by wider refining margins and higher throughputs. Marathon’s throughput surged by 55%, led by the Andeavor merger.

Marathon’s gross refining and marketing margin expanded by $0.40 per barrel YoY to $14.70 per barrel in the third quarter. Meanwhile, peer Valero Energy’s (VLO) refining margin contracted by $0.40 per barrel to $10 per barrel, and Phillips 66’s (PSX) contracted by $2.20 per barrel to $11.20 per barrel.

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Marathon’s Speedway spinoff

Last month, Elliott Management proposed that Marathon should be split into three entities: Refining, Midstream, and Retail. Elliott believes the separation could unlock value for shareholders. The recommendation boosted MPC stock by over 8%. To learn more, read Marathon Petroleum: Shaw Backed Elliott, Stock Rose 8%.

Today, MPC announced its plan to spin off its Speedway company-owned retail operations. The company also plans to appoint a special committee to evaluate possibilities to raise value for the company’s midstream operations.

In a press release, MPC chairman and CEO Gary R. Heminger said, “We will execute on the separation of Speedway and evaluate opportunities to unlock the value of Midstream, while continuing to optimize the larger combined business and progress the realization of our targeted synergies. Our goal has been, and continues to be, maximizing shareholder value over the long term.”

Peers’ performance

In the third quarter, Phillips 66’s earnings fell 3% YoY to $1.4 billion due its refining profit falling. That decline was partly offset by its midstream, marketing, and chemicals earnings rising. To learn more, read Phillips 66 Earnings Beat Estimate, Stock Rose 4%.

Meanwhile, Valero Energy’s net income fell 29% YoY to $609 million. The company’s earnings were pulled down by its ethanol and refining earnings falling, and offset by its renewable diesel earnings turning from a loss to a profit. To learn more, read Valero’s Q3 Earnings Crush Wall Street’s Estimates.

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