Marathon Petroleum: Further Upside Likely After A Better-Than-Feared Q4

2025-02-04 12:28:30 ET

Summary

• Marathon Petroleum Corporation has faced challenges due to tighter crack spreads, but its MLP, MPLX, has performed well, contributing to a solid earnings report and supporting shares.
• MPC's refining operations are undervalued at 3.2x, 2024 EBITDA, with aggressive share repurchases also increasing the per-share value of its MPLX stake.
• Despite a tough refining environment, MPC's secure dividend and flexible buyback strategy offer a minimum 3% share count reduction and strong shareholder returns.
• Long-term demand for gasoline and limited refinery supply support MPC's potential for upside, making it a strong buy for patient investors.

Shares of Marathon Petroleum Corporation ( MPC ) have been a poor performer over the past year, losing 14% as the company has faced headwinds from tighter crack spreads even as its MLP, MPLX (MPLX), has continued to perform very well. Investors got some relief on Tuesday when the company reported solid earnings , sending the stock up 5%, I last covered shares in November , when I rated the stock a “strong buy” given my sum-of-the-parts valuation analysis; however, the stock has been essentially flat since this recommendation given the crack spread environment. With updated financials, now is a good time to revisit MPC. I remain bullish....

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