On Wednesday, Mizuho Securities adjusted its outlook on Marathon Petroleum (NYSE:MPC) shares, reducing the price target to $175 from the previous $198 while maintaining a Neutral stance on the stock. The firm's decision follows observed stock underperformance, attributed to a mix of lower earnings projections and heightened risk aversion among investors.
Marathon Petroleum is anticipated to report third-quarter financial metrics that fall short of market expectations, with estimated misses of 17% for EBITDA, 40% for free cash flow, and 54% for earnings per share compared to consensus figures. The primary cause of these shortfalls is identified as weaker refining results, including lower indicator margins, while the midstream segment is also expected to show a slight quarter-over-quarter decline due to reduced NGL prices.
According to Mizuho, the stock's underperformance on Tuesday was a result of significant downward revisions in earnings combined with an increase in risk premiums, which are being driven by current geopolitical tensions. Marathon Petroleum, being disproportionately owned relative to its peers, bore the brunt of the market's corrective actions.
The revised price target of $175 is based on a net asset value approach, taking into account a less favorable refining macro environment anticipated over the next six to twelve months. Despite this adjustment, Mizuho has opted to retain a Neutral rating on Marathon Petroleum, signaling a cautious outlook for the company's stock in the near term.
In other recent news, Marathon Petroleum has experienced several noteworthy developments. Piper Sandler has maintained a Neutral rating on Marathon Petroleum, adjusting its earnings estimates based on recent commodity price trends and operational factors. The revised third-quarter earnings per share (EPS) and earnings before interest, taxes, depreciation, and amortization (EBITDA) are now expected to be $0.79 per share and $2,205 million, respectively.
JPMorgan has lowered the price target for Marathon Petroleum shares from $172.00 to $171.00, attributing this 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.
Marathon Petroleum is also dealing with a prolonged strike at its Detroit refinery, with negotiations between the company and the Teamsters union remaining unresolved. This strike may potentially expand to other Marathon facilities.
In terms of cost reduction, Marathon Petroleum has maintained a neutral stance, according to Piper Sandler. The firm has noted Marathon's shift from focusing on cost reduction to becoming cost competitive. TD Cowen has recently 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. The company's midstream segment, MPLX (NYSE:MPLX), is executing growth opportunities and increasing cash flows.
InvestingPro Insights
To complement Mizuho's analysis, InvestingPro data offers additional context on Marathon Petroleum's financial health. The company's P/E ratio of 8.27 suggests that the stock may be undervalued relative to its earnings, which aligns with Mizuho's cautious but neutral stance. This valuation metric becomes particularly interesting when considering that Marathon Petroleum has been profitable over the last twelve months, with a robust revenue of $148.77 billion.
InvestingPro Tips highlight that management has been aggressively buying back shares, which could be seen as a vote of confidence in the company's future prospects despite the current challenges. Additionally, Marathon Petroleum has maintained dividend payments for 14 consecutive years, offering a dividend yield of 2.06%. This consistent dividend policy may provide some stability for investors during periods of stock price volatility.
It's worth noting that InvestingPro offers 11 additional tips for Marathon Petroleum, providing a more comprehensive analysis for investors seeking deeper insights into the company's performance and outlook.
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