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Marathon Petroleum Corp MPC

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Morningstar’s Analysis

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Marathon Petroleum Q2 Reflects Strong Market, Lower Costs; Shareholder Returns Just Getting Started

Allen Good, CFA Sector Strategist

Analyst Note

| Allen Good, CFA |

Marathon Petroleum's earnings staged a strong rebound during the second quarter thanks to improved refining market conditions. Adjusted earnings swung to $437 million from a loss of $868 million last year thanks to improved refining segment earnings. Adjusted earnings exclude a $11.6 billion pretax benefit from the close of the Speedway sale during the quarter, which delivered aftertax proceeds of $17.2 billion. Using these proceeds, Marathon has already reduced debt by $2.5 billion and repurchased $1 billion in shares. It still has $9 billion to deploy to repurchases, which it will do in the open market in the next 12-16 months. As of today, that amounts to 25% of its $36 billion market capitalization, which includes its $18 billion stake in MPLX. Our fair value estimate and no-moat rating are unchanged, leaving the shares modestly undervalued. However, the magnitude of the buyback should support further price appreciation even as Marathon has outperformed peers year to date.

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Company Profile

Business Description

Marathon Petroleum is an independent refiner with 13 refineries in the midcontinent, West Coast, and Gulf Coast of the United States with total throughput capacity of 2.9 million barrels per day. The firm also owns and operates midstream assets primarily through its listed MLP, MPLX.

539 South Main Street
Findlay, OH, 45840-3229
T +1 419 422-2121
Sector Energy
Industry Oil & Gas Refining & Marketing
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Hard Assets
Employees 57,900