Marathon Petroleum Stock Jump Over 4% on Earnings Beat; Target Price $88 in Best Case

Marathon Petroleum shares jumped over 4% in pre-market trading on Wednesday after the Findlay, Ohio-based oil refiner reported better-than-expected earnings and revenue in the fourth quarter, thanks to higher energy prices and a waning pandemic.

The Company is engaged in the petroleum product refining, marketing, retail and midstream business in the United States reported an adjusted net income of $794 million, or $1.30 per share, better compared to a loss $608 million, or $0.94 per share, a year ago. That was above the Wall Street consensus estimates of $0.56 per share.

The largest U.S. oil refiner said its revenue nearly doubled to $35.61 billion from a year ago. That too topped the market expectations of $24.33 billion.

This was largely driven by higher energy prices. Supply shortages and political tensions in Eastern Europe and the Middle East pushed oil prices up on Monday, ending January at their highest level in a year.

On Friday, the benchmark, Brent oil, reached their highest levels in over a year, reaching $91.70 and $88.84, respectively, marking their sixth straight weekly gain. This was their best performance since February 2021, up 17%, Reuters reported.

Marathon Petroleum stock surged over 4% to $77.13 in pre-market trading on Wednesday. The stock surged over 15% so far this year after surging more than 50% in 2021.

Analyst Comments

“EPS beat consensus with strong refining results as our ethanol price concerns appear misplaced. MPC repurchased $1B more than forecast, with the implied monthly rate at ~$1B; it announced a surprise incremental $5B buyback authorization. 1Q22 turn around guide more benign than peers. 2022 capex was higher than expected, likely due to timing of Martinez renewable spend,” noted Jason Gabelman, Equity Analyst at Cowen.

“Risks to our price target to the downside include product market weakness, tighter crude differentials, and higher oil prices that could negatively affect retail earnings. Additionally, buybacks below expectations present a risk.”

Marathon Petroleum Stock Price Forecast

Thirteen analysts who offered stock ratings for Marathon Petroleum in the last three months forecast the average price in 12 months of $79.69 with a high forecast of $88.00 and a low forecast of $70.00.

The average price target represents a 7.66% change from the last price of $74.02. Of those 13 analysts, 11 rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $85 with a high of $110 under a bull scenario and $50 under the worst-case scenario. The investment bank gave an “Overweight” rating on the oil refiner’s stock.

“Delevering and cost-cutting leaves a better-positioned company for this cycle: Marathon Petroleum’s (MPC) sale of its Speedway (retail) business has left it with an extremely defensive balance sheet. The company has ~$16B of deployable capital (PF for tax refund) of which $9B is slated for buybacks. The company has also cut substantial costs, leaving it in a more-profitable position going forward, and its Midstream business (MPLX) is highly stable,” noted Connor Lynagh, Equity Analyst at Morgan Stanley.

“But, enough upside in refining to merit OW: In addition to the substantial upward pressure on shares from the buyback, we see upside to consensus estimates driven by a substantial improvement in refining industry conditions, which Marathon Petroleum (MPC) can participate in meaningfully.”

Several other analysts have also updated their stock outlook. Raymond James raised the target price to $87 from $85. Piper Sandler cut to neutral from overweight and lifted the target price to $76 from $69. Goldman Sachs upped the target price to $77 from $72. RBC increased the target price to $83 from $77.

Technical analysis suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

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