On Wednesday, Mizuho Securities adjusted its outlook on Marathon Petroleum (NYSE: NYSE:MPC) shares, reducing the company's price target from $201.00 to $198.00. The firm maintained a Neutral rating on the stock.
The revision is a response to anticipated shortfalls in earnings before interest, taxes, depreciation, and amortization (EBITDA), free cash flow (FCF), and earnings per share (EPS) for the second quarter of 2024.
The expected discrepancies, as outlined by Mizuho, suggest a 14% EBITDA miss, a 30% FCF shortfall, and a 39% EPS drop compared to the consensus. These figures were attributed to lower refining margins, specifically due to a weaker performance in secondary product pricing. The firm's analysis indicates that Marathon Petroleum's margin capture was less than anticipated, leading to reduced financial forecasts.
The firm's commentary highlighted the challenges faced by Marathon Petroleum in the current quarter. The issues stem primarily from weaker cracks, a term referring to the spread between crude oil purchase prices and the selling prices of refined products. This spread is a critical factor in a refiner's profitability. Additionally, the company's higher exposure to secondary product pricing has compounded the impact on its financial results.
Mizuho's revised price target is based on a net asset value (NAV) approach. The NAV-based price target represents the firm's assessment of Marathon Petroleum's per-share value, taking into account the company's assets and liabilities.
The assessment by Mizuho serves as an update to investors on the financial health and outlook for Marathon Petroleum. The company, along with the broader refining sector, continues to navigate the complex dynamics of the energy market, including fluctuating crude oil prices and varying demand for refined products.
In other recent news, U.S. crude oil imports have reached a near two-year high, with Chevron (NYSE:CVX), Marathon Petroleum, Valero Energy (NYSE:VLO), and Phillips 66 (NYSE:PSX) leading the imports. This surge is in response to the upcoming summer driving season, with imports from Canada, Mexico, Guyana, and Colombia notably increasing.
According to Mizuho and Piper Sandler, Marathon Petroleum's share price target has been adjusted due to refining outlook and dynamic market conditions, respectively, but both firms maintain a neutral stance on the company's stock.
Marathon Petroleum is also part of a lawsuit filed by Honolulu against major oil companies, alleging they misled the public about climate change risks linked to fossil fuels. The U.S. Supreme Court has sought input from President Joe Biden's administration on this case.
In preparation for the summer driving season, U.S. crude oil refiners, including Marathon Petroleum, are expected to operate above 90% of their combined processing capacity. These are all recent developments in the operations of these companies.
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