Morningstar

Marathon Petroleum Earnings: Divestiture of Refining Assets Focuses Portfolio on Gulf Coast

Refining disruptions in the Middle East and Russia continue to benefit US refiners.

Marathon logo seen at a petrol station.
Stephen Zenner/SOPA Images via Getty
Securities in This Article
Marathon Petroleum Corp
(MPC)

Key Morningstar Metrics for Marathon Petroleum

  • Fair Value Estimate
    : $236.00
  • Morningstar Rating
    : ★
  • Morningstar Economic Moat Rating
    : Narrow
  • Morningstar Uncertainty Rating
    : Very High

What We Thought of Marathon Petroleum’s Earnings

Marathon Petroleum’s MPC third-quarter earnings topped market expectations as strong operating performance continued to combine with a very strong market environment. It agreed to sell its St. Paul, MN, and Mandan, ND, refineries and associated midstream assets for $4.2 billion.

Why it matters: Refining disruptions in the Middle East and Russia continue to benefit US refiners, including Marathon. Operating well further enhances its advantages and the benefits of the market environment. Divestiture of the two refining assets further concentrates its portfolio on the highly attractive Gulf Coast.

  • Utilization remained strong at 100%, but capture rates slipped to 93% from 112% in the second quarter. The decline resulted from benchmark prices for clean products rising much faster than prices for secondary products during the quarter, not from any operational deterioration.
  • The divestiture comprises $3.45 billion for the refining assets and $750 million to MPLX for the midstream assets. At $19.5k per capacity barrel and $2.0K per complexity barrel, the valuations are very attractive relative to recent sales. Proceeds will go toward Gulf Coast refinery investments and shareholder returns.

The bottom line: Our fair value estimate of $236 for narrow-moat Marathon Petroleum leaves its shares significantly overvalued. The near-term outlook is for continued strong margins, which will benefit Marathon. However, we see share pricing is materially higher than midcycle margins for the duration of our forecast, which we view as unrealistic.

  • To arrive at today’s share price, we would have to increase our midcycle margin assumptions by about 65%. That is still about 40% below benchmark margins expected for full-year 2026 and 2027, demonstrating the strength of the current market.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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