MPC - Embedded Expectations Analysis - 2019 09 16
Marathon Petroleum Corporation (MPC:USA) currently trades below recent averages relative to UAFRS-based (Uniform) Earnings, with a 15.3x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may be concerned about demand, their ability to return value to shareholders, and cash flow growth.Specifically, management is confident their total system capture for the quarter was 82% versus their historical average of 90%, and they may lack confidence in their ability to sustain recent operating cash flow growth and meet their long-term shareholder return goals. Additionally, they may lack confidence in their ability to sustain recent storage improvements in the Southwest and to diversify their asset base into the Permian basin. Moreover, management may be concerned about headwinds to West Coast crack spreads and gasoline demand. Finally, they may be concerned about the impact of tropical storm Barry on gasoline demand, and they may be concerned about demand for distillate in H2 2019.
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.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- 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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