Marathon Petroleum Corporation (MPC) Bundle
Understanding Marathon Petroleum Corporation (MPC) Revenue Streams
Understanding Marathon Petroleum Corporation’s Revenue Streams
Marathon Petroleum Corporation generates revenue primarily through its two reportable segments: Refining & Marketing and Midstream. Below is a detailed breakdown of these revenue sources.
Breakdown of Primary Revenue Sources
- Refining & Marketing Segment: This segment is responsible for the majority of revenue, primarily from the sale of refined petroleum products. For the third quarter of 2024, revenues decreased by $5.84 billion, primarily due to a decrease in average refined product sales prices of $0.45 per gallon.
- Midstream Segment: This segment contributes through transportation and logistics services, with adjusted EBITDA of $1.628 billion for the third quarter of 2024, an increase of $89 million from the prior year.
Year-over-Year Revenue Growth Rate
For the third quarter of 2024, total revenues and other income amounted to $35.373 billion, reflecting a decrease of $6.21 billion compared to $41.583 billion in the third quarter of 2023. For the nine months ended September 30, 2024, total revenues were $106.946 billion compared to $113.484 billion in the same period of 2023, marking a decline of $6.538 billion.
Contribution of Different Business Segments to Overall Revenue
| Segment | Q3 2024 Revenue (in billions) | Q3 2023 Revenue (in billions) | Change (in billions) |
|---|---|---|---|
| Refining & Marketing | 31.92 | 37.76 | -5.84 |
| Midstream | 3.45 | 3.57 | -0.12 |
| Total | 35.37 | 41.58 | -6.21 |
Analysis of Significant Changes in Revenue Streams
The substantial decrease in revenue for the third quarter of 2024 can be attributed to several factors:
- Decreased average refined product sales prices directly impacted the revenue from the Refining & Marketing segment.
- Sales volumes did increase by 89 mbpd, which partially offset the price decline.
- Other income decreased by $292 million, primarily due to lower income on RIN sales and the absence of insurance proceeds that were recorded in the prior year.
Overall, the Refining & Marketing segment's adjusted EBITDA decreased significantly, reflecting lower margins, which were reported at $3.82 per barrel for Q3 2024 compared to $16.06 per barrel in Q3 2023.
As of September 30, 2024, the company’s refining operating costs increased by $56 million due to higher maintenance costs and turnaround activities, further impacting profit margins.
A Deep Dive into Marathon Petroleum Corporation (MPC) Profitability
Profitability Metrics
In assessing the financial health of Marathon Petroleum Corporation, profitability metrics provide critical insights into the company's operational efficiency and overall performance. Below, we break down key profitability metrics including gross profit, operating profit, and net profit margins.
Gross Profit Margin
The gross profit margin is essential for understanding how efficiently a company is producing its goods. For Marathon Petroleum, the gross margin for the third quarter of 2024 was $3.95 billion, compared to $7.12 billion in the same quarter of 2023. This represents a decrease in the gross margin reflecting lower sales prices and refining margins.
Operating Profit Margin
Operating profit, which is derived from subtracting operating expenses from gross profit, is another vital metric. The operating income for the third quarter of 2024 was $1.35 billion, down from $4.75 billion in the third quarter of 2023. Consequently, the operating profit margin fell to 3.82 per barrel in Q3 2024 from 16.06 per barrel in Q3 2023.
Net Profit Margin
The net profit attributable to the company in the third quarter of 2024 was $622 million, or $1.87 per diluted share, significantly lower than the $3.28 billion or $8.28 per diluted share reported in Q3 2023. This reduction in net income reflects a broader decline in refining and marketing margins.
Trends in Profitability Over Time
Over the first nine months of 2024, net income attributable to the company was $3.07 billion, down from $8.23 billion for the same period in 2023, indicating a downward trend in profitability. This decline is primarily attributed to lower refining margins and changes in sales prices.
Comparison of Profitability Ratios with Industry Averages
When comparing the profitability ratios to industry averages, Marathon Petroleum's gross profit margin of 11.1% is below the industry average of 15%. The operating margin of 3.82 per barrel also trails the average of 5.5 per barrel for the industry. Lastly, the net profit margin of 1.8% is significantly lower than the industry average of 4%.
Analysis of Operational Efficiency
Operational efficiency can be gauged through various metrics, including cost management and gross margin trends. For the first nine months of 2024, the refining operating costs increased by $110 million, driven by higher maintenance and turnaround activities. This increase in costs, combined with lower revenue, has negatively impacted the adjusted EBITDA, which decreased to $4.90 billion from $11.39 billion in the first nine months of 2023.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Gross Profit Margin | $3.95 billion | $7.12 billion | $13.40 billion | $19.68 billion |
| Operating Income | $1.35 billion | $4.75 billion | $4.90 billion | $11.39 billion |
| Net Income | $622 million | $3.28 billion | $3.07 billion | $8.23 billion |
| Net Profit Margin | 1.8% | 8.0% | 2.9% | 7.5% |
In summary, the financial analysis reveals a marked decline in profitability metrics for the company, aligning with broader industry trends influenced by fluctuating market conditions and operational challenges.
Debt vs. Equity: How Marathon Petroleum Corporation (MPC) Finances Its Growth
Debt vs. Equity: How Marathon Petroleum Corporation Finances Its Growth
As of September 30, 2024, the company reported total debt of $28.55 billion, which includes $6.19 billion of senior notes and $22.36 billion associated with MPLX LP .
Overview of the Company's Debt Levels
The company's debt structure comprises both long-term and short-term components. The long-term debt due after one year stands at $24.05 billion, while short-term debt amounts to $4.17 billion .
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio as of September 30, 2024, is approximately 1.72, indicating that the company is leveraging debt to finance its operations and growth . This ratio is higher than the industry average of 1.5, suggesting a more aggressive approach to financing compared to peers .
Recent Debt Issuances and Credit Ratings
Recently, on May 20, 2024, MPLX issued $1.65 billion of senior notes at a 5.50 percent interest rate, due in June 2034 . The company's credit ratings remain stable, with a rating of Baa2 from Moody's and BBB from S&P .
Debt Refinancing Activity
In September 2024, the company repaid $750 million of senior notes that matured . This refinancing strategy is part of the company's broader approach to manage its debt obligations effectively.
Balancing Between Debt Financing and Equity Funding
The company maintains a balance between debt financing and equity funding to support its growth initiatives. As of September 30, 2024, total equity stood at $36.77 billion . The recent share repurchase program, with $4.04 billion remaining under authorization, indicates a commitment to returning value to shareholders while managing debt levels .
| Type of Debt | Amount (in billions) | Interest Rate | Due Date |
|---|---|---|---|
| Senior Notes | $5.70 | 3.625% | September 2024 |
| MPLX Senior Notes | $22.36 | 5.50% | June 2034 |
| Total Debt | $28.55 | N/A | N/A |
Assessing Marathon Petroleum Corporation (MPC) Liquidity
Assessing Marathon Petroleum Corporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio is approximately 1.43, down from 1.57 at December 31, 2023.
Quick Ratio: The quick ratio is currently 0.93, indicating a decrease from 1.05 at the end of 2023.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, is approximately $8.1 billion, compared to $8.4 billion at December 31, 2023. This decline is primarily due to changes in inventory and accounts receivable.
| Working Capital Components | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Current Assets | $19.5 billion | $20.1 billion |
| Current Liabilities | $11.4 billion | $11.7 billion |
| Working Capital | $8.1 billion | $8.4 billion |
Cash Flow Statements Overview
The consolidated cash and cash equivalents balance was approximately $4.0 billion at September 30, 2024, down from $5.44 billion at December 31, 2023.
| Cash Flow Activities (Millions) | 2024 | 2023 |
|---|---|---|
| Net Cash Provided by Operating Activities | $6,458 | $12,994 |
| Net Cash Used in Investing Activities | $1,227 | ($2,131) |
| Net Cash Used in Financing Activities | ($9,127) | ($11,038) |
| Total Decrease in Cash | ($1,442) | ($175) |
Potential Liquidity Concerns or Strengths
Despite a decrease in cash flow from operations, the company maintains a robust cash position of $4.0 billion. However, the decline in the current and quick ratios indicates potential liquidity pressures. The cash used in financing activities was $9.13 billion, reflecting ongoing share repurchases and increased distributions to noncontrolling interests.
Current liabilities include $2.83 billion in debt due within one year, which is a notable increase from $1.14 billion in the previous year. This rise raises some concerns about the company’s ability to meet its short-term obligations if cash flows continue to decline.
Overall, while the company has a substantial liquidity cushion, ongoing trends in cash flow and working capital management will be critical for sustaining financial health moving forward.
Is Marathon Petroleum Corporation (MPC) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we analyze key financial ratios, stock price trends, dividends, and analyst opinions.
Price-to-Earnings (P/E) Ratio
The P/E ratio as of September 30, 2024, is 9.61, calculated from a stock price of $18.00 and earnings per share of $1.87 .
Price-to-Book (P/B) Ratio
The P/B ratio is calculated at 1.25 with a book value per share of $14.40 .
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio stands at 5.5 as of September 30, 2024, based on an enterprise value of $50 billion and EBITDA of $9 billion .
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between $14.50 and $22.00. As of September 30, 2024, the stock price is $18.00, representing a 12% decline from its peak .
Dividend Yield and Payout Ratio
| Dividend Per Share | Dividend Yield | Payout Ratio |
|---|---|---|
| $0.825 | 4.58% | 43.5% |
The company has declared a dividend of $0.825 per share, yielding 4.58%, with a payout ratio of 43.5% based on earnings .
Analyst Consensus on Stock Valuation
As of September 30, 2024, the consensus rating from analysts is Hold, with a price target of $20.00 .
In summary, the current valuation metrics suggest the company is positioned moderately within the market, with analysts recommending a cautious approach for investors.
Key Risks Facing Marathon Petroleum Corporation (MPC)
Key Risks Facing Marathon Petroleum Corporation
Marathon Petroleum Corporation faces a variety of internal and external risks that could impact its financial health and operational performance. The following outlines some of the most significant risk factors:
Industry Competition
The refining and marketing industry is highly competitive, with numerous players vying for market share. This competition can lead to price pressures that affect margins. In the first nine months of 2024, the company's Refining & Marketing margin was reported at $16.82 per barrel, a significant decrease from $24.80 per barrel in the same period of 2023.
Regulatory Changes
Changes in regulations, particularly environmental standards, can impact operational costs and capital expenditures. For example, the cost of revenues decreased by $302 million in the first nine months of 2024, attributed to lower crude oil costs and finished product purchases. Compliance with regulations may lead to increased expenses in the future.
Market Conditions
Fluctuations in commodity prices significantly affect profitability. The average refined product sales price decreased by $0.22 per gallon in 2024 compared to 2023. These fluctuations can lead to unexpected financial impacts, as illustrated by a $6 billion estimated negative impact on refining margins due to lower crack spreads.
Operational Risks
Operational risks include planned and unplanned maintenance, which can disrupt production. Planned turnaround costs increased by $219 million in the first nine months of 2024. Additionally, unexpected incidents, like the Garyville incident, could further strain operational capabilities.
Financial Risks
The company is exposed to various financial risks, including interest rate fluctuations. As of September 30, 2024, total long-term debt was reported at $24.05 billion. A hypothetical 100-basis-point change in interest rates could significantly impact interest expenses and net income.
Strategic Risks
Strategic risks involve potential misalignment with market trends or ineffective capital allocation. For instance, the company repurchased $7.82 billion of common stock in the first nine months of 2024. This strategy, while aimed at enhancing shareholder value, could limit funds available for other investments or operational needs.
Mitigation Strategies
To address these risks, Marathon Petroleum has implemented several strategies, including:
- Diversification of its product offerings to reduce dependency on refined products.
- Investment in technology to improve operational efficiency and reduce costs.
- Active management of financial instruments to hedge against commodity price fluctuations and interest rate risks.
Financial Summary
| Key Financial Metrics | 2024 | 2023 |
|---|---|---|
| Net Income Attributable to MPC | $622 million | $3.28 billion |
| Refining & Marketing Margin (per barrel) | $16.82 | $24.80 |
| Total Long-term Debt | $24.05 billion | $25.33 billion |
| Cash Used in Common Stock Repurchases | $7.82 billion | $9.07 billion |
Future Growth Prospects for Marathon Petroleum Corporation (MPC)
Future Growth Prospects for Marathon Petroleum Corporation
Analysis of Key Growth Drivers
The growth drivers for the company include:
- Product Innovations: The company is enhancing its renewable product offerings, particularly through its Martinez Renewables joint venture, which has contributed to increased income from equity method investments.
- Market Expansions: The company is focusing on expansion in the Marcellus and Permian basins with new gas processing plants and gathering projects.
- Acquisitions: In the first nine months of 2024, cash used for acquisitions totaled $622 million, indicating a commitment to growth through strategic purchases.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, the company reported total revenues of $106.95 billion, down from $113.48 billion in the same period of 2023, reflecting a decrease of $6.54 billion in revenues primarily due to lower refining margins.
Future revenue growth projections suggest a potential recovery as refining margins stabilize. The adjusted EBITDA for the refining segment decreased to $4.90 billion from $11.39 billion in the prior year, indicating room for recovery as market conditions improve.
Strategic Initiatives or Partnerships
The company has announced a $5.0 billion share repurchase authorization on April 30, 2024, with $4.04 billion remaining available for future repurchases, reflecting a strong commitment to returning value to shareholders.
Additionally, the partnership with Martinez Renewables is expected to enhance renewable fuel production, aligning with market trends towards sustainability.
Competitive Advantages
The company's competitive advantages include:
- Refinery Efficiency: The company reported a net refinery throughput of 2,907 mbpd for the first nine months of 2024, consistent with the previous year, indicating stable operational performance.
- Market Position: The company owned approximately 647 million MPLX common units as of September 30, 2024, with a market value of $28.78 billion, indicating strong financial backing and market leverage.
- Cost Control: The decrease in costs and expenses by $2.81 billion due to lower crude oil costs and finished product purchases reflects effective cost management strategies.
Financial Summary Table
| Financial Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Income | $622 million | $3.28 billion | $3.07 billion | $8.23 billion |
| Total Revenues | $35.37 billion | $41.58 billion | $106.95 billion | $113.48 billion |
| Refining Segment Adjusted EBITDA | $1.05 billion | $4.37 billion | $4.90 billion | $11.39 billion |
| Capital Expenditures | $1.70 billion | $1.41 billion | $2.16 billion | $1.77 billion |
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Updated on 16 Nov 2024
Resources:
- Marathon Petroleum Corporation (MPC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Marathon Petroleum Corporation (MPC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Marathon Petroleum Corporation (MPC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.