Key Takeaways
- Marathon Petroleum fell 7% today, with Valero Energy down 8%, Phillips 66 down 7% and HF Sinclair down 7%, while the S&P 500 rose.
- None of the four had news, but crude oil pulled back as signs of better U.S.-Iran relations eased worries about the supply disruptions behind refiners’ record margins.
- Marathon’s forward P/E was already about half its five-year average before today’s drop, and Valero and Phillips 66 were also well below their averages.
- The drop makes Marathon a better buy for investors who can handle the swings, and its third-quarter report next week is the next test.
Marathon Petroleum (MPC) sank 7% today, and the rest of the refiners fell with it: Valero Energy (VLO) dropped 8%, Phillips 66 (PSX) 7% and HF Sinclair (DINO) 7%. The S&P 500 rose on the same day.
None of the four put out any news. (Piper Sandler even assumed coverage of HF Sinclair this morning with an Overweight rating and a $152 price target.)
The margins hang on the Middle East
Crude oil pulled back today as better diplomatic signals between the U.S. and Iran eased worries about global supply disruptions.
That matters because those disruptions are what sent refining margins soaring last quarter. Valero opened the group’s third-quarter reports on Oct. 22 with its biggest quarterly profit ever. Its adjusted EPS of $23.90 came in well ahead of the $21.18 consensus.
So any hint that the conflict is cooling hits the whole group at once, and smaller refiners fell as much or more today.
Already cheap
The market wasn’t paying much for those earnings to begin with. Marathon traded at 6.0x forward earnings at Monday’s close, about half its five-year average of 11.7x.
And today’s drop takes it lower still, close to the 5.1x low it hit in July 2022.
At Monday’s close, Valero (6.8x against a 10.9x average) and Phillips 66 (7.4x against 10.9x) were in the same spot. The market is marking down the whole group, and nothing about Marathon in particular.
TIKR tracks 19 analysts on Marathon Petroleum. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Marathon Petroleum, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Marathon Petroleum’s Analyst Ratings
Next week’s test
My take: a single-digit multiple means investors already see these as peak margins, and one day of hopeful diplomacy made them more sure of it. But Marathon is still earning wartime margins today, and at roughly 6x forward earnings the stock already prices in a lot of that fading. For anyone who can handle the swings, today’s drop makes Marathon a better buy.
Phillips 66 is expected to report this week, and Marathon next week. The third quarter’s results are already done, so what management says about margins so far in the fourth quarter will matter more.
Of course, if the U.S. and Iran do reach a deal, margins could fall faster than analysts expect, and a 6x multiple wouldn’t look so cheap.
So what is Marathon Petroleum stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
