Despite the recent market volatility on concerns over the Fed turning hawkish again to bring inflation on its path to reaching the 2% target, prominent energy stock Marathon Petroleum Corporation (MPC) has gained 5.5% over the past five days and 12.9% over the past month. For reasons explained throughout this article, I think MPC is a no-brainer pick this week.
With the most recent inflation and jobs data suggesting continued rate hikes, the renewed fears of recession drive market volatility. However, the energy market’s unusual supply-demand dynamics helped fundamentally sound stocks like MPC outperform the broader market.
The stock has gained 14.7% year-to-date to close the last trading session at $133.50. Moreover, it returned 72.6% over the past year versus the S&P 500’s 8% decline. Furthermore, the stock trades above the 50-day and 200-day moving averages of $122.20 and $106.96, respectively, indicating a bullish trend.
Moreover, on January 27, MPC declared its quarterly dividend of $0.75 per share, payable on March 10, 2023. The company pays $3.00 per share dividends annually, translating to a 2.25% yield at the current price. This compares to its 4-year average yield of 4.11%. Its dividend payouts have grown at CAGRs of 7% and 10.4% over the past three and five years, respectively.
Moreover, in November 2022, the company increased its quarterly dividend by 30%. In addition to paying out $1.3 billion as dividends, MPC returned 12 billion through share repurchases during the fiscal year 2022. Additionally, the company plans $1.3 billion in capital expenditure this year.
Here is what could shape MPC’s performance in the near term:
Robust Financials
MPC’s total revenues and other income increased 12.6% year-over-year to $40.09 billion during the fiscal fourth quarter that ended December 31, 2022. Net income attributable to MPC increased 329.1% year-over-year to $3.32 billion, while its net EPS rose 458.3% year-over-year to $7.09.
During the fiscal year 2022, MPC’s total revenues and other income increased 48.8% year-over-year to $179.95 billion. Its adjusted EBITDA from continuing operations increased 171.7% year-over-year to $24.34 billion. Additionally, adjusted net income attributable to MPC came in at $13.50 billion or $26.16 per share, compared to $1.56 billion or $2.45 per share in the previous year.
High Profitability
MPC’s trailing-12-month asset turnover ratio of 2.03x is 206.4% higher than the 0.66x industry average. Its trailing 12-month ROCE, ROTC, and ROTA of 53.55%, 1.19%, and 16.15% are 138.4%, 117.8%, and 106.7% higher than the respective industry averages of negative 22.46%, 9.18%, and 7.81%.
Discounted Valuation
MPC’s forward EV/Sales multiple of 0.59 is 69.9% lower than the respective industry averages of 1.95. Its forward Price/Sales multiple of 0.42 is 70.8% lower than the industry average of 1.45.
Also, in terms of forward non-GAAP P/E, MPC is currently trading at 7.12x, which is 18.7% lower than the industry average of 8.75x.
POWR Ratings Show Promise
MPC’s overall A rating translates to a Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Our proprietary rating system also evaluates each stock based on eight distinct categories. MPC has grade A for Momentum, which is justified as the stock is trading above its 50-day and 200-day moving averages.
In addition, the stock has a B grade for Growth, in sync with its robust financials.
Among the 91 stocks in the B-rated Energy – Oil & Gas industry, MPC is ranked #4.
Click here to see additional POWR Ratings for Value, Stability, Sentiment, and Quality for MPC.
Bottom Line
MPC’s fundamentals appear rock-solid. Its revenue and EBITDA have grown at 17% and 40.4% CAGRs, respectively, over the past three years. Moreover, the company is committed to returning shareholder value through dividends, share repurchases, etc.
Also, Wall Street analysts expect the stock to hit $143.91, indicating a potential upside of 7.8%. Hence, MPC could be a solid buy this week.
How Does Marathon Petroleum Corporation (MPC) Stack up Against Its Peers?
MPC has been rated A, equating to a Strong Buy. Check out these other stocks within the Energy- Oil & Gas industry with an A (Strong Buy) rating: PrimeEnergy Resources Corporation (PNRG), Epsilon Energy Ltd. (EPSN), and Valero Energy Corp. (VLO).
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MPC shares were trading at $131.19 per share on Monday morning, down $2.31 (-1.73%). Year-to-date, MPC has gained 13.38%, versus a 6.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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