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Things to Know Before Marathon Petroleum's (MPC) Q4 Earnings

Marathon Petroleum Corporation MPC is set to release fourth-quarter 2020 results on Monday Feb 2, before the opening bell.

The Zacks Consensus Estimate for the to-be-reported quarter’s loss is $1.42 per share and for revenues is $16.67 billion.

Against this backdrop, let’s consider the factors that are likely to impact the company’s December-quarter results.

Factors to Consider for Q4 Results

Marathon Petroleum’s cost-reduction efforts are consistently impressive. Given the historic oil market collapse and the coronavirus-induced weak demand for the commodity, Marathon Petroleum already announced a cut in its 2020 capital spending plan by $1.4 billion or 30% to $3 billion. The company is also expecting a reduction in its operating expenses to $950 million. These cost-saving measures are expected to have driven the company’s fourth-quarter earnings and cash flows higher.

Moreover, the firm’s midstream unit, which mainly represents its general partner and majority limited partner interests in MPLX LP MPLX, saw a profitability of $960 million in the third quarter of 2020, indicating a 4.5% increase from the year-ago quarter’s reported figure. Earnings were supported by stable, fee-based revenues, lower operating expenses and contribution from organic growth projects, a trend that most likely continued in the fourth quarter as well.

Precisely, the Zacks Consensus Estimate for fourth-quarter Midstream segment’s profitability is pegged at $964 million, hinting at an improvement of 8.4% from $889 million reported in the year-ago period.

On the flip side, the economic disruption caused by the coronavirus outbreak and the resultant shrinking demand for refined products and transportation fuels on account of widespread travel restrictions are likely to have hurt the fourth-quarter earnings and cash flows of Marathon Petroleum. As a result of this bleak business environment, the Zacks Consensus Estimate for the company’s fourth-quarter Refining and Marketing segment is pegged at a loss of $1.46 billion. However, a year ago, the unit generated a profit of $912 million.

Further, the Zacks Consensus Estimate for refinery throughput stands at 2,460 thousand barrels per day (mbpd), suggesting a fall from the year-ago reported number of 3,069 mbpd.

What Does Our Model Say?

Our proven Zacks model does not conclusively predict an earnings beat for Marathon Petroleum this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Marathon Petroleum has an Earnings ESP of 0.00%.

Zacks Rank: Marathon Petroleum carries a Zacks Rank #3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q3 Earnings & Surprise History

In the last reported quarter, this Findlay, OH-based company reported an adjusted loss of $1 per share, narrower than the Zacks Consensus Estimate of a loss of $1.63. The company’s bottom line was favorably impacted by a stronger-than-expected performance from both the segments.

However, the bottom line compared unfavorably with the year-earlier quarter's earnings of $1.63 due to depressed refining margins.

Marathon Petroleum’s revenues of $17.5 billion missed the Zacks Consensus Estimate of $19.9 billion and also declined 36.6% year over year.

As far as its earnings surprises are concerned, Marathon Petroleum is on a strong footing. Its bottom line exceeded the Zacks Consensus Estimate in all the trailing four quarters, the average being 47.05%. This is depicted in the graph below:

Stocks to Consider

While earnings outperformance looks doubtful for Marathon Petroleum this reporting cycle, some firms worth considering from the energy space on the basis of our model, which shows that these have the perfect combination of ingredients to deliver an earnings beat this season are as follows:

NuStar Energy L.P. NS has an Earnings ESP of +21.21% and a Zacks Rank #2, currently. The company is scheduled to release earnings on Feb 4.

Plains All American Pipeline, L.P. PAA has an Earnings ESP of +17.00% and is a #3 Ranked stock, currently. The firm is scheduled to release earnings on Feb 9.

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