Marathon Petroleum (MPC) PT Lifted to $70 at Oppenheimer

Oppenheimer analyst, Fadel Gheit, is reiterating an Outperform rating and raising his Price Target on Marathon Petroleum (NYSE: MPC) to $70 from $60. The growth in the distribution of MPLX-MarkWest is expected to be 25% in 2016. Based on company guidance, refining margins and crack spread, reflecting strip benchmark prices, crude differentials, and capture rates, MPC should generate operating cash flow of $4.8B and $4.0B. No change to Outperform rating.

Adjusted 3Q15 earnings were $1,043M, or $1.94/share vs. the $1.82 consensus estimate, up 60% YoY and 28% sequentially, including 82% refining, 14% marketing and 4% pipeline. Earnings are driven by refining and marketing margins, capture rate, crude differential and capacity utilization. Adjusted earnings exclude a $144M charge for cancellation of the residual oil upgrader expansion (ROUX) project.

Refining Income of $1.5B increased 50% YoY and 21% sequentially, on 19% and 16% higher gross margin. Throughput was +2% YoY, -2% sequentially; operating costs declined 4% YoY but increased 16% sequentially. Benefits from higher crack spreads, crude oil acquisition prices, and favorable product pricing were partially offset by less favorable crude oil acquisition costs relative to LLS and other factors.

Speedway Income was $243M, up 104% YoY and 91% sequentially. Fuel sales were 1.55 billion gallons, up 85% YoY, driven by acquired locations and higher light product and merchandise margins from the legacy stores, partially offset by higher expenses. Margins averaged $0.2146/gallon, +34% and +59%, respectively. Speedway captured >double the expected synergies of $75M.

Pipeline Segment income was $72M, up 4% YoY, primarily due to higher pipeline transportation revenue, reflecting higher average tariff rates and crude and light product throughput and partially offset by increased operating expenses and costs incurred in connection with the proposed MarkWest transaction.

Operating cash flow of $1.4B, up 45% YoY and 19% sequentially, funded $585M CAPEX, up 4% and 21%, respectively, $153M in buybacks, $171M in dividends and $11M of MLP distributions, for core free cash flow of $656M. Total debt was $6.7B, cash was $2.0B, and the net debt ratio 26.4%.

Assuming capital investment of $2.5B each year, dividend of $614M this year and $670M next year and MPLX distribution of $41M and $62M, he expects MPC to generate free cash flow of $1.6B this year and $0.7B next year, before acquisitions and share repurchase.

For an analyst ratings summary and ratings history on Marathon Petroleum click here. For more ratings news on Marathon Petroleum click here.

Shares of Marathon Petroleum closed at $57.19 yesterday.

You May Also Be Interested In

• Alphabet stock surges 11% to record high on Q1 earnings beat, first-ever dividend
• NOV Inc (NOV) Tops Q1 EPS by 3c; offers guidance
• Stifel Upgrades LeMaitre Vascular (LMAT) to Buy