With a $53.78 billion market cap, Marathon Petroleum Corporation (MPC) is a leading, integrated, downstream energy company in the United States. The company operates in two business segments: Refining & Marketing and Midstream. It operates more than 7,160 jobber outlets in 37 states, the District of Columbia, and Mexico through independent entrepreneurs.

The oil and gas prices climbed significantly in the first quarter of this year, driven by solid demand and tight global supplies aggravated by the Russia-Ukraine war. However, since mid-June, energy prices have retreated from their peaks due to macroeconomic factors, including recessionary fears.

Oil and gasoline prices are again rebounding on OPEC’s move to cut oil production by about 2 million barrels per day. Moreover, the Biden Administration is considering a plan to refill the Strategic Petroleum Reserves to support prices. Furthermore, OPEC expects oil demand to increase by 3.10 million barrels per day (bpd) in 2022 and by 2.70 million bpd in 2023.

MPC has been doing exceptionally well in terms of returning value to shareholders. “Our team delivered on supplying products to meet strong market demand. Utilizing the proceeds from the Speedway divestiture, we have completed approximately $12 billion of our $15 billion return of the capital program,” said Michael J. Hennigan, MPC’s president, and CEO.

As of July 31, the company has completed $12.10 billion of its previously committed $15 billion capital return program. In addition, its Board of Directors had approved a separate and incremental $5 billion share repurchase authorization.

On July 27, MPC’s Board of Directors declared a dividend of $0.58 per share on the common stock, paid on September 12. It pays $2.32 as dividends annually, yielding 2.16% on the current price. Its 4-year average dividend yield translates to 4.18%. The company’s dividends have increased at a CAGR of 4.21% over the past three years and 9.41% over the past five years.

MPC has gained 64.3% year-to-date and 71.6% over the past year to close the last trading session at $107.86. The stock is currently trading just 5.7% below its 52-week high of $114.35, which it hit on June 8, 2022.

Here is what could influence MPC’s performance in the upcoming months:

Robust Financials

MPC’s revenues and other income increased 81.8% year-over-year to $54.24 billion in the fiscal 2022 second quarter ended June 30, 2022. The company’s income from continuing operations, net of tax, came in at $6.22 billion, up 957.3% year-over-year.

Furthermore, the company’s net income per share from continuing operations amounted to $10.95, registering an increase of 2,333.3% from the prior-year period. As of June 30, 2022, MPC has $13.30 billion of cash, cash equivalents, and short-term investments and $5 billion available on its bank revolving credit facility.

Favorable Analyst Estimates

Analysts expect MPC’s revenue for the fiscal 2022 third quarter (ended September 2022) to come in at $39.91 billion, indicating an increase of 22.4% from the same period in 2021. The current quarter’s $6.15 consensus EPS estimate represents a 741.9% year-over-year increase. The company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.

In addition, the consensus revenue estimate of $170.90 billion for the fiscal year 2022 (ending December 2022) represents a growth of 41.3% from the previous year. The consensus EPS estimate of $21.55 for the ongoing year indicates a 779.5% year-over-year rise.

High Profitability

MPC’s trailing-12-month asset turnover ratio of 1.68% is 183.9% higher than the 0.59% industry average. Its trailing-12-month ROCE of 29.64% is 94.44% higher than the 15.24% industry average. Likewise, the stock’s trailing-12-month ROTC and ROTA of 12.23% and 8.46% compare to the industry averages of 6.76% and 5.59%, respectively.

Attractive Valuation

In terms of forward non-GAAP P/E, MPC’s 5.03x is 33.9% lower than the 7.61x industry average. Its forward EV/Sales of 0.47x is 77.3% lower than the industry average of 1.81x. The stock’s 3.69x forward EV/EBITDA is 30.5% lower than the 5.31x industry average. Also, its forward EV/EBIT multiple of 4.49 compares with the industry average of 8.39.

In addition, MPC’s 0.31x forward Price/Sales is 76% lower than the industry average of 1.31x. The stock’s 3.57x forward Price/Cash Flow is 14.3% lower than the 4.17x industry average.

Power Ratings Show Promise

MPC’s overall A rating equates to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. MPC has a grade of A for Growth, consistent with its strong performance in the last reported quarter and solid revenue and earnings growth estimates. The stock also has a grade of A for Quality, in sync with its higher-than-industry profitability metrics.

MPC is ranked #4 out of 94 stocks in the B-rated Energy-Oil & Gas industry.

Beyond what I have stated above, we have also given MPC grades for Sentiment, Momentum, Value, and Stability. Get access to all the MPC ratings here.

Bottom Line

MPC reported solid fiscal 2022 second-quarter financials. Moreover, the company seems well-positioned to benefit from its strategic business developments, a positive long-term outlook for energy demand, and a potential for higher energy prices in the near term.

Furthermore, the stock is currently trading above its 50-day and 200-day moving averages of $97.82 and $87.18, respectively, indicating an uptrend. MPC has been experiencing substantial hedge fund sentiment, and given its solid fundamentals, I think it could be wise to invest in it now.

How Does Marathon Petroleum Corp. (MPC) Stack Up Against its Peers?

MPC has an overall POWR Rating of A. One could also check out these other stocks within the Energy-Oil & Gas industry with an A (Strong Buy) rating: Whitecap Resources, Inc. (SPGYF), PBF Energy Inc. (PBF), and Epsilon Energy Ltd. (EPSN).

MPC shares rose $0.53 (+0.49%) in premarket trading Friday. Year-to-date, MPC has gained 72.84%, versus a -20.39% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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