Marathon Petroleum Offers 3 Reasons To Buy Now
Goldman Sachs remains bullish on Marathon Petroleum Corp (NYSE: MPC) on asset quality, midstream growth and cash generation from its Speedway retail unit.
"In our view, MPC offers premium quality refining assets on the Gulf Coast and the Mid-Con, with high levels of complexity and crude optionality," analyst Neil Mehta wrote in a note.
Mehta, who raised the price target by $4 to $54, also noted the value in the MPLX/midstream business, with sustained growth at MarkWest and an inventory of $1.4 billion of MLP-eligible EBITDA with the parent.
The company is set to report its third-quarter results on October 27 and Mehta estimate EPS of $0.87, higher than consensus of $0.82 despite potential headwinds from Colonial pipeline outage and Whiting downtime.
"We expect MPC will reiterate that it sees value in keeping its business integrated, but there may be the potential to monetize $600 million in wholesale EBITDA into MPLX, if the IRS approves a private letter ruling," Mehta highlighted.
On the valuation, the analyst said Marathon trades at 5.5x/5.2x on 2017/2018 EV/EBITDA vs. peers at 6.6x/5.8x, in part due to investor skepticism around the MPLX-MarkWest transaction given the size and timing of the deal.
Mehta, who maintained his Buy rating on the stock, expects multiple expansion in Marathon as the MarkWest assets continue to deliver growth.
The analyst also updated 2016-2018 EPS estimates to $2.39/$3.88/$4.03 from $2.35/$4.17/$4.10 to reflect updated product margin assumptions.
At the time of writing, shares of Marathon Petroleum rose 1.72 percent to $42.49.
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|Dec 2016||JP Morgan||Upgrades||Neutral||Overweight|
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