The beat was driven by higher-than-expected throughput and refined product sales volume, which helped the ‘Refining & Marketing’ segment income to blow away estimates. Operating income from the unit totaled $912 million, significantly ahead of the Zacks Consensus Estimate of $218 million. Total refined product sales volumes and throughput of 3,750 thousand barrels per day (mbpd) and 3,069 mbpd came ahead of the Zacks Consensus Estimate of 3,619 mbpd and 3,052 mbpd, respectively.
However, the bottom line was 35.3% below the year-earlier quarter’s earnings due to weak showing from the Midstream segment.
Marathon Petroleum, which recently announced a 9.4% increase in its quarterly dividend to 58 cents, reported revenues of $31.4 billion that beat the Zacks Consensus Estimate of $29.7 billion but declined 3.6% year over year.
Y/Y Segmental Performance
Refining & Marketing: The Refining & Marketing segment reported operating income of $912 million, slightly lower than $923 million in the year-ago quarter. The decline reflects lower y/y refining margins and throughputs.
Specifically, refining margin of $15.55 per barrel decreased versus $15.70 a year ago. Total refined product sales volumes were 3,750 mbpd, down from the 3,764 mbpd in the year-ago quarter. Moreover, throughput fell from 3,111 mbpd in the year-ago quarter to 3,069 mbpd.Capacity utilization during the quarter was 94%.
Retail: Income from the Retail segment totaled $477 million, down 22.2% from the year-ago period. The Retail segment was dragged down by lower fuel margins, partly offset by higher merchandise sales. In particular, the company’s retail fuel margin fell from 32.35 cents per gallon in the fourth quarter of 2018 to 28.65 cents per gallon in the quarter under review. However, same-store merchandise sales were up by 4.7% year over year.
Midstream: This unit mainly reflects Marathon Petroleum’s general partner and majority limited partner interests in MPLX LP (MPLX – Free Report) – a publicly-traded master limited partnerships that own, operate, develop and acquire pipelines and other midstream assets.
Segment profitability was $889 million, same as the fourth quarter of 2018. Earnings were buoyed by strong overall growth across MPLX’s businesses.
Costs, Capex & Balance Sheet
Marathon Petroleum – which spun off from Marathon Oil Corporation (MRO – Free Report) in 2011 – reported expenses of $30.5 billion in fourth-quarter 2019, essentially unchanged from the year-ago quarter.
In the reported quarter, Marathon Petroleum spent $1.8 billion on capital programs (48% on the Midstream segment). As of Dec 31, the company had cash and cash equivalents of $1.5 billion and a total debt of $28.8 billion, with a debt-to-capitalization ratio of 40.6%.
During the fourth quarter, Marathon Petroleum returned $409 million of capital to shareholders.
Zacks Rank & Stock Pick
Marathon Petroleum holds a Zacks Rank #3 (Hold).
A better-ranked player in the energy space is Murphy USA Inc. (MUSA – Free Report) that sports a Zacks Rank #2 (Buy). The 2020 Zacks Consensus Estimate for this El Dorado, AR-based company is $5.59, representing 7.2% earnings per share growth over 2019.
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