Citi has adjusted its outlook on Marathon Petroleum (NYSE:MPC) shares, reducing the price target to $167 from $172 while keeping a Neutral rating on the stock.
The move comes ahead of the company's third-quarter earnings report scheduled for November 5, with expectations of a weaker refining quarter.
The forecast is based on a decrease in Marathon Petroleum's blended indicator, which fell by $2.96 per barrel to $13.27.
Marathon Petroleum's earnings are anticipated to be impacted by the latest commodity price trends. Despite the lower refining indicator, the company's earnings may be supported by higher pricing on secondary products. This could help offset some of the negative effects of the decreased blended indicator on the company's capture rates.
The company has been active in returning capital to shareholders, having completed over $900 million in stock buybacks as of July. At that time, Marathon Petroleum still had $5.8 billion left in its repurchase authorization. Market consensus estimates suggest that the company is likely to buy back around $1.9 billion worth of shares in the current quarter, aligning with the lower crack spreads observed.
In terms of earnings per share (EPS), Citi's analyst projects $1.04 for the quarter, which stands in contrast to the consensus estimate of $0.92.
In other recent news, Marathon Petroleum has been facing refining challenges, leading Mizuho Securities to lower its price target from $198 to $175 while maintaining a Neutral stance. The company's third-quarter earnings are expected to fall short of market expectations, primarily due to weaker refining results and lower indicator margins.
Piper Sandler has also maintained a Neutral rating on Marathon Petroleum, revising its third-quarter earnings per share (EPS) and earnings before interest, taxes, depreciation, and amortization (EBITDA) estimates to $0.79 per share and $2,205 million, respectively.
JPMorgan has reduced the price target for Marathon Petroleum shares from $172.00 to $171.00 due to lower refining captures than previously modeled. The company's third-quarter EPS estimate has been adjusted to $0.90, a decrease from the initial $2.00 prediction. Meanwhile, Marathon Petroleum is dealing with a prolonged strike at its Detroit refinery, with negotiations between the company and the Teamsters union remaining unresolved.
In terms of cost reduction, Marathon Petroleum has shifted its focus from cost reduction to becoming cost competitive, as noted by Piper Sandler. TD Cowen has upgraded Marathon's stock target to $190 from $187 following a significant earnings beat, driven by its refining operations and a robust share buyback program.
Lastly, Marathon Petroleum has projected strong demand for gasoline, diesel, and jet fuel, with limited global refining capacity additions anticipated to support an enhanced mid-cycle environment for refining.
InvestingPro Insights
Recent InvestingPro data adds depth to Citi's analysis of Marathon Petroleum (MPC). The company's P/E ratio of 8.38 suggests that it's trading at a relatively low valuation compared to its earnings, which could be attractive to value investors. This is particularly noteworthy given Marathon Petroleum's strong financial performance, with a revenue of $148.77 billion over the last twelve months as of Q2 2024.
InvestingPro Tips highlight that management has been aggressively buying back shares, aligning with the article's mention of the company's active capital return program. This strategy, coupled with a high shareholder yield, demonstrates Marathon Petroleum's commitment to delivering value to its investors.
Despite the lowered price target from Citi, it's worth noting that the InvestingPro Fair Value for MPC stands at $193.82, suggesting potential upside from the current price. However, investors should be aware that 7 analysts have revised their earnings downwards for the upcoming period, which could impact short-term performance.
For readers interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for Marathon Petroleum, providing a broader perspective on the company's financial health and market position.
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