On Wednesday, TD Cowen made an adjustment to the stock price target for Marathon Petroleum (NYSE: MPC), bringing it down to $170 from the previous $174, while continuing to endorse the stock with a Buy rating.
The firm's analysis followed the release of the company's third-quarter 2024 results, which surpassed expectations due to a higher refining throughput than initially guided. The firm acknowledged that Marathon Petroleum's share buyback program and balance sheet are normalizing as expected.
The analyst from TD Cowen highlighted that for the fourth quarter of 2024, they project shareholder returns to annualize at a 16% return yield. This forecast is based on the strong performance in the third quarter and is expected to provide near-term support for Marathon Petroleum's stock.
The firm also anticipates that for the fiscal years 2025 and 2026, the return yield will remain attractive at an estimated 9%, with funding coming from the company's organic cash flow.
Looking ahead to fiscal year 2025, TD Cowen estimates that Marathon Petroleum's capital expenditures at the parent company level will be around $0.9 billion. Despite the slight decrease in the price target, the firm maintains its position that Marathon Petroleum remains a top pick within the industry.
The adjustment reflects the firm's analysis of the company's recent performance and future prospects, taking into account the various financial strategies and operational throughput that could influence shareholder value.
In other recent news, Marathon Petroleum Corporation (NYSE:MPC) unveiled impressive third-quarter earnings per share of $1.87 and a refining utilization rate of 94%. In addition, the company announced a $5 billion share repurchase authorization and is projecting a crude throughput of over 2.6 million barrels per day for Q4 2024. These recent developments underscore MPC's commitment to operational excellence and profitability, as the company anticipates record refined product consumption in 2024.
In the midstream segment, primarily through MPLX (NYSE:MPLX), MPC reported a 6% year-over-year adjusted EBITDA increase. The company maintains a comfortable cash balance of about $1 billion, with a debt-to-capital ratio goal of 25% to 30%. MPC also expects a distribution of $2.5 billion from MPLX by 2025, covering dividends and capital programs.
Lastly, the company's plans include $0.5 billion in quarterly share repurchases, aiming for $1.5 billion in 2025, and investments in Los Angeles and Galveston Bay refineries expected to yield returns around 20%. Despite a volatile refining margin environment and anticipation of a weaker economic environment next year, MPC's strategic cash buffer and diversified system position it well for future growth.
InvestingPro Insights
To complement TD Cowen's analysis, recent data from InvestingPro offers additional context on Marathon Petroleum's financial position. The company's P/E ratio (adjusted) stands at 7.01 for the last twelve months as of Q3 2024, suggesting the stock may be undervalued relative to its earnings. This aligns with TD Cowen's continued Buy rating, despite the slight reduction in price target.
InvestingPro Tips highlight that Marathon Petroleum has been aggressively buying back shares, which supports TD Cowen's projection of a 16% annualized return yield for shareholders in Q4 2024. Additionally, the company has maintained dividend payments for 14 consecutive years and has raised its dividend for 3 consecutive years, underscoring its commitment to shareholder returns.
While the company's revenue growth has declined by 6.59% over the last twelve months, Marathon Petroleum remains profitable, with a gross profit of $14.41 billion USD for the same period. This profitability, combined with the company's shareholder-friendly policies, reinforces TD Cowen's view of Marathon Petroleum as a top pick in the industry.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Marathon Petroleum, providing a deeper understanding of the company's financial health and market position.
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