What Impact Falling Gasoline Prices Will Have On Marathon Petroleum’s Earnings


Key Takeaways

Average U.S. gasoline prices slid in the fourth quarter, pressuring refining margins for Marathon Petroleum Corp. and competitors.Marathon Petroleum’s midstream pipeline earnings likely increased, but not enough to offset declining refining income, according to analysts’ forecasts ahead of the company’s quarterly report next Tuesday.Gasoline inventories may continue rising, pressuring prices of Marathon Petroleum’s product further in 2024.

Analysts expect Marathon Petroleum Corp. (MPC) will report a substantial decline in fourth-quarter earnings when it releases results next Tuesday, reflecting narrowing profit margins in its refining business driven by falling gasoline prices.

Marathon likely recorded a profit of $835.9 million, or $2.22 per share, according to consensus estimates compiled by Visible Alpha. That would mark a 73% plunge from the same period a year ago, when the company earned $3.1 billion, or $7.09 a share.

Marathon Petroleum Corp.’s Quarterly Forecast

 
 Analysts’ Estimates for Q4 2023
 Q3 2023
 Q4 2022

 Revenue
 $35.2B
 $41.6B
 $40.1B

 Diluted EPS
 $2.22
 $8.28
 $7.09

 Net income
 $835.9M
 $3.2B
 $3.1B

Source: Visible Alpha

Pretax profit in the company’s midstream pipeline unit likely rose 9% to $1.2 billion, according to Visible Alpha. But pretax earnings in its refining and marketing division, typically accounting for the bulk of Marathon’s income, are projected to drop 86% to $566 million.

U.S. retail gasoline prices fell to an average of $3.48 per gallon in the fourth quarter, down from $3.87 in the third quarter and $3.68 in the fourth quarter of 2022. Gasoline prices slid throughout the latest quarter, dropping to $3.28 from $3.93 at the start of the period.

The U.S. Energy Information Administration predicts U.S. gasoline prices will average about $3.40 per gallon in 2024, down about 10 cents from 2023, as gasoline inventories increase.

Shares of Marathon Petroleum have gained about 20% in the past 12 months and have traded at record highs this month.



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