What's in Store for Marathon Petroleum Stock in Q2 Earnings?

Marathon Petroleum Corporation MPC is set to release second-quarter earnings on Aug. 5. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at a profit of $3.22 per share on revenues of $30.91 billion.

Let us delve into the factors that might have influenced MPC’s performance in the to-be-reported quarter. Before that, it is worth taking a look at the company’s performance in the last reported quarter.

Highlights of MPC’s Q1 Earnings & Surprise History

In the last reported quarter, the Findlay, OH-based downstream operator’s adjusted loss of 24 cents per share was narrower than the Zacks Consensus Estimate of a loss of 63 cents, due to stronger-than-expected performance in its Refining & Marketing segment. Revenues of $31.9 billion beat the Zacks Consensus Estimate of $30.1 billion but fell 4.1% year over year.

Marathon Petroleum’s earnings beat the consensus estimate in each of the trailing four quarters, delivering an average surprise of 343.39%.  

This is depicted in the graph below. 

Marathon Petroleum Corporation Price and EPS Surprise

Marathon Petroleum Corporation price-eps-surprise | Marathon Petroleum Corporation Quote

Trend in Estimate Revision for MPC Stock

The Zacks Consensus Estimate for the second-quarter bottom line has been revised 5.8% downward in the past 60 days. The estimated figure indicates a 21.84% year-over-year decline. Moreover, the top-line estimate implies a 19.43% decrease from the year-ago period’s level.

Factors to Consider Ahead of MPC’s Q2 Release

Marathon Petroleum makes money through two main segments, Refining & Marketing and Midstream. The Refining & Marketing segment refines crude oil and other feedstocks, purchases refined products and ethanol for resale, and distributes refined products like transportation fuels, heavy fuel oil, asphalt, propane and petrochemicals. The Midstream segment transports, stores, distributes and markets crude oil and refined products, and gathers, processes and transports natural gas and natural gas liquids.

Marathon Petroleum’s second-quarter revenues are likely to have received meaningful support from its strong midstream operations, particularly through MPLX. The segment is expected to have benefited from increased pipeline throughput and steady, fee-based tariff income, reliable revenue streams that might have offset the negative impact of lower crude oil prices and supported overall sales momentum despite ongoing volatility in commodity markets.

In addition, the company is projected to have seen a solid demand for refined products and LPG exports, fueled by strengthened overseas markets and continued logistics expansion. This export-driven strength is likely to have sustained sales volumes and bolstered the top line, partially countering softer domestic demand stemming from economic uncertainty and elevated fuel inventories.

On the downside, Marathon Petroleum is expected to have faced margin pressure from elevated turnaround and maintenance costs during the second quarter, partially caused by ongoing and unplanned repairs. These rising expenses are expected to have added to the strain already caused by weaker product prices. Moreover, the lingering impact of the Galveston Bay refinery outage is likely to weigh on bottom-line results. Continued operational disruptions during the quarter are expected to have suppressed margins further and increased repair-related costs.

At the same time, while Marathon has been investing in renewable diesel and broader energy transition projects, this segment is likely to have continued to face persistent headwinds, including softer margins and ongoing start-up losses during the second quarter. The expected incremental benefit from these initiatives might have been dampened by ramp-up challenges and delays in recognizing Production Tax Credits.

What Does Our Model Say About MPC?

The proven Zacks model does not conclusively predict an earnings beat for Marathon Petroleum this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. This is not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

MPC’s Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company is -2.74%.

MPC’s Zacks Rank:  MPC currently carries a Zacks Rank #3.

Stocks to Consider

Here are some firms from the energy space that you may want to consider, as these have the right combination of elements to post an earnings beat this reporting cycle.

Kimbell Royalty KRP has an Earnings ESP of +68.29% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The firm is scheduled to release earnings on Aug. 7. Valued at around $1.59 billion, Kimbell Royalty’s shares have lost 9.7% in a year. Kimbell Royalty is a Fort Worth, TX-based company that owns and acquires mineral and royalty interests in oil and natural gas properties across the United States. The company’s revenues are primarily generated from royalty payments on the sale of oil, natural gas and natural gas liquids produced on its properties, without incurring the associated operating costs or capital expenditures.

Canadian Natural Resources Limited CNQ has an Earnings ESP of +4.89% and a Zacks Rank #3 at present. Valued at around $66.69 billion, Canadian Natural Resources’ shares have lost 10.6% in a year.

The firm is scheduled to release earnings on Aug. 7. Canadian Natural Resources is a major global independent crude oil and natural gas producer based in Calgary, AB. The company holds a diverse portfolio of assets, including conventional and unconventional oil, natural gas and oil sands operations primarily across Western Canada, as well as offshore ventures in the UK North Sea and Africa.

XPLR Infrastructure, LP XIFR has an Earnings ESP of +32.50% and a Zacks Rank #3 at present. The firm is scheduled to release earnings on Aug. 7.

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This article originally published on Zacks Investment Research (zacks.com).

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