MPC - Embedded Expectations Analysis - 2018 10 22
Marathon Petroleum Corporation (MPC:USA) currently trades at historical peaks relative to UAFRS-based (Uniform) Assets, with a 2.0x Uniform P/B. At these levels, the market has bullish expectations for the firm, but management has concerns about their substantial amount of debt held at MPLX, their gasoline and distillate margins, and their investments in technologySpecifically, management may be concerned about the $12bn of debt held at MPLX, and about their gasoline and distillate margins being adversely impacted by the overall rise in crude oil. Moreover, they may lack confidence in their ability to meet their elevated earnings guidance, and may be exaggerating their conservatism when projecting the future. They may also lack confidence in their ability to enhance their retail network through their increased Speedway presence in New York. Furthermore, they may lack confidence in their IT systems integration plan, and ability to achieve cost synergies going forward. Finally, they may be concerned about their ability to increase efficiencies through investments in technology
Marathon Petroleum is an independent petroleum refining and marketing, retail and midstream company. The company's segments include: Refining and Marketing, which refines crude oil and other feedstocks at its refineries, purchases refined products and ethanol for resale and distributes refined products; Retail, which sells transportation fuels and convenience products in the retail market across the U.S.; and Midstream, which transports, stores, distributes and markets crude oil and refined products via refining logistics assets, pipelines, terminals, towboats and barges, gathers, processes and transports natural gas, and gathers, transports, fractionates, stores and markets natural gas liquids.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
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- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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