On Friday, Marathon Petroleum Corp (NYSE:MPC) shares had its price target reduced by Piper Sandler from the previous $190.00 to $168.00. Despite the adjustment in price target, the firm maintained a Neutral rating on the stock. The revision reflects a valuation method that projects forward to the 2024/2025 fiscal years, employing a sum-of-the-parts (SOTP) analysis.
The SOTP valuation approach used by Piper Sandler applies a 5.5 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple for the refining operations.
Additionally, it uses a 5.8 times blended multiple to account for corporate overhead costs. This method of valuation attempts to estimate the aggregate value of a company's individual business segments.
Piper Sandler's analysis also takes into account the current market prices of Marathon Petroleum's holdings in its master limited partnership (MLP), adjusting for non-recourse net debt. The MLP structure is often used in the energy sector to finance pipelines and other capital-intensive assets, offering tax advantages and a means to raise capital.
For the refining and marketing (R&M) segment of Marathon Petroleum, the valuation is based on a 9 times multiple on the projected 2024 EBITDA. This segment typically involves the refining of crude oil into gasoline and other petroleum products, as well as the distribution and marketing of these products.
The price target reduction comes amid a time when energy companies are facing dynamic market conditions, with fluctuating oil prices and evolving regulatory environments.
Price targets and stock ratings from financial firms like Piper Sandler provide investors with perspectives on potential future stock performance based on various financial metrics and industry trends.
In other recent news, Marathon Petroleum has been making significant headlines. The U.S. Supreme Court has requested President Joe Biden's administration's opinion regarding a lawsuit filed by Honolulu against several major oil firms, including Marathon Petroleum. The lawsuit accuses these companies of misleading the public about the risks of climate change linked to the burning of fossil fuels.
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.
Despite a decrease in Q1 profits, Marathon Petroleum has continued to prioritize shareholder returns, with a collective return of $5.5 billion through dividends and stock repurchases in the first quarter of 2024.
Piper Sandler has adjusted its price target on Marathon Petroleum shares due to observed changes in the market, particularly the narrowing of Western Canadian Select differentials. The firm maintains a Neutral rating on the stock.
Marathon Petroleum has also announced a leadership transition, with Maryann T. Mannen, currently serving as the company's President, set to take over as Chief Executive Officer and join the Board of Directors on August 1, 2024. Outgoing CEO, Michael J. Hennigan, will assume the role of Executive Chairman of the Board. These are all recent developments in the company's operations.
InvestingPro Insights
Marathon Petroleum Corp (NYSE:MPC) has been under the analysts' lens, and the recent price target revision by Piper Sandler draws attention to the company's future fiscal prospects. In light of this, it's valuable to consider some key metrics and insights from InvestingPro. The company holds a market capitalization of $60.08 billion, and its current P/E ratio stands at 8.29, with an adjusted P/E ratio for the last twelve months as of Q1 2024 at 7.88. These figures suggest a valuation that may appeal to value investors.
InvestingPro Tips highlight that Marathon Petroleum's management has been proactively engaging in share buybacks, which can indicate confidence in the company's value and a shareholder-friendly policy. Additionally, the company has a track record of maintaining dividend payments for 14 consecutive years, with a dividend yield of 1.94% as of mid-2024, complemented by a 10.0% dividend growth in the last twelve months as of Q1 2024. This consistency in dividends may be particularly attractive to income-focused investors.
While there are concerns with eight analysts revising their earnings downwards for the upcoming period, Marathon Petroleum's prominent status in the Oil, Gas & Consumable Fuels industry and its high return over the last year, with a price total return of 55.84%, cannot be overlooked. For investors interested in a deeper dive into Marathon Petroleum's performance and future outlook, InvestingPro offers additional insights. There are more InvestingPro Tips available, providing a comprehensive analysis for informed decision-making. Unlock these valuable insights with a special offer using coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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