Famous energy company Marathon Petroleum Corporation (MPC) surpassed consensus estimates in its 2022 third quarter. Despite rampant macroeconomic uncertainties, it beat the consensus revenue estimate by 8.4% and the EPS estimate by 11.2%.
President and CEO Michael J. Hennigan said, "Market demand for our products remains strong, and our third-quarter results reflect our improving operational and commercial execution."
Moreover, MPC recently declared a dividend of $0.75 /share on the common stock, up 29.3% from its previous dividend /share. It has paid dividends for 11 consecutive years.
Its dividend payouts have increased at a 5.5% CAGR over the past three years and at a 10.4% CAGR over the past five years. Its current dividend payout is 2.43%, while its four-year average yield is 4.17%.
Also, MPC finally announced closing its joint venture with Neste for the Martinez renewables project. The joint venture aims to support California's Low Carbon Fuel Standard goals and is a notable venture toward sustainable development.
In addition, investors' interest in energy stocks is evident from the Energy Select Sector SPDR ETF's (XLE) 63.4% year-to-date gains, which might bode well for MPC.
MPC has gained 93% year-to-date and 100% over the past year to close the last trading session at $123.47. Also, it has gained 8.7% over the past month.
Here is what could shape MPC's performance in the near term:
Solid Financials
MPC's total revenues and other income came in at $47.24 billion for the third quarter that ended September 30, 2022, up 44.8% year-over-year. Its adjusted net income came in at $3.86 billion, up 731.3% year-over-year, while its adjusted EPS came in at $7.81, up 969.9% year-over-year. Also, its adjusted EBITDA came in at $6.83 billion, up 182.9% year-over-year.
Attractive Valuations
MPC's forward EV/Sales of 0.45x is 76.4% lower than the industry average of 1.92x. Its forward EV/EBITDA of 3.45x is 35.6% lower than the industry average of 5.36x. In addition, its forward Price/Sales of 0.32x is 76.7% lower than the 1.39x industry average, while its forward Price/Cash Flow of 3.66x is 15.4% lower than the industry average of 4.33x.
Favorable Analyst Estimates
Analysts expect MPC's revenue to increase 8.7% year-over-year to $38.69 billion for the quarter ending December 2022 and 48.7% year-over-year to $179.87 billion in 2022.
Its EPS is expected to increase 363.8% year-over-year to $6.03 for the quarter ending December 2022 and 946.1% year-over-year to $25.63 in 2022. It surpassed EPS estimates in all four trailing quarters. Wall Street analysts expect the stock to hit $134.46 in the near term, indicating a potential upside of 8.9%.
POWR Ratings Reflect Promising Outlook
MPC has an overall rating of A, which equates to a Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
MPC has an A grade for Momentum. It is trading above its 50-day and 200-day moving averages of $111.00 and $95.29, respectively.
Also, it has a B grade for Growth, in sync with its solid financial growth in the last reported quarter.
In the 92-stock Energy – Oil & Gas industry, MPC is ranked #2. The industry is rated B.
Click here for the additional POWR Ratings for MPC (Value, Stability, Sentiment, Quality).
View all the top stocks in the Energy – Oil & Gas industry here.
Bottom Line
MPC registered solid top and bottom-line growth in its latest quarter. Moreover, its EPS is expected to increase by 22% per annum for the next five years. Given the tailwinds in the energy sector and the stock's positive outlook, MPC could be an ideal addition to one's portfolio.
How Does Marathon Petroleum Corporation (MPC) Stack up Against Its Peers?
While MPC has an overall POWR Rating of A, one might consider looking at its industry peers, PrimeEnergy Resources Corporation (PNRG), PBF Energy Inc. (PBF), and Adams Resources & Energy, Inc. (AE), which also have an overall A (Strong Buy) rating.
MPC shares were trading at $121.27 per share on Wednesday afternoon, down $2.20 (-1.78%). Year-to-date, MPC has gained 94.45%, versus a -15.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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