Marathon Petroleum: Extremely Compelling With Q2 Momentum

2025-05-22 01:59:43 ET

Summary

• Marathon Petroleum's value is anchored by its MPLX stake, providing stable cash flows and supporting aggressive share buybacks.
• Refining margins are recovering, with improving crack spreads and lower turnaround costs expected to drive a strong Q2 rebound.
• The refining business is attractively valued at just ~3x cash flow, enabling substantial capital returns and long-term EPS growth.
• Despite Q1 headwinds, I remain very bullish and rate MPC a strong buy for its compelling long-term value and capital return potential.

Shares of Marathon Petroleum ( MPC ) have been a poor performer over the past year, given a weakening of the refining cycle. However, shares have rebounded strongly from their lows, as crack spreads have recently improved. When I last covered MPC in February , I rated shares a “strong buy” given its sum-of-the-parts valuation and my long-term bullishness on refining. Since then, shares have been flat while the market has lost 3%; while outperformance is welcome, a flat performance is also less than I had been forecasted. With updated financials and a revised macro outlook, now is a good time to revisit MPC. I remain very bullish....

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