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Marathon Petroleum Corp MPC

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Morningstar’s Analysis

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Economic Moat




Marathon Petroleum Reports Q2 Loss; Sale of Speedway Advances Strategic Actions; Shares Undervalued

Allen Good, CFA Sector Strategist

Analyst Note

| Allen Good, CFA |

Prior to its first-quarter earnings, Marathon Petroleum announced it reached an agreement to divest its retail Speedway segment for $21 billion in cash, $16.5 billion after tax. The deal value is less than the $24 billion we use in our sum-of-the-parts fair value estimate, but still represents a good deal for shareholders. Total value implies a 14.0 times  pretax multiple and 11.0 times after tax of estimated 2019 Speedway EBITDA of $1.5 billion, a premium to the average 9.5 times of traded peers. Additionally, the deal releases value for shareholders as the current embedded value of Speedway was well below that level, given Marathon’s total market capitalization is currently only $25 billion. Proceeds will go toward strengthening the balance sheet and returning capital to shareholders. We plan to incorporate the deal into our model, but do not expect a material change to our fair value estimate or no moat rating.

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Company Profile

Business Description

Marathon Petroleum is an independent refiner with 14 refineries in the midcontinent, West Coast, and Gulf Coast of the United States with total throughput capacity of 2.8 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, 2020
Fiscal Year End Dec 31, 2020
Stock Type Hard Assets
Employees 60,910