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What Impact Falling Gasoline Prices Will Have On Marathon Petroleum's Earnings

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Key Takeaways

  • Average U.S. gasoline prices slid in the fourth quarter, pressuring refining margins for Marathon Petroleum Corp. and competitors.
  • Marathon Petroleum's midstream pipeline earnings likely increased, but not enough to offset declining refining income, according to analysts' forecasts ahead of the company's quarterly report next Tuesday.
  • Gasoline inventories may continue rising, pressuring prices of Marathon Petroleum's product further in 2024.

Analysts expect Marathon Petroleum Corp. (MPC) will report a substantial decline in fourth-quarter earnings when it releases results next Tuesday, reflecting narrowing profit margins in its refining business driven by falling gasoline prices.

Marathon likely recorded a profit of $835.9 million, or $2.22 per share, according to consensus estimates compiled by Visible Alpha. That would mark a 73% plunge from the same period a year ago, when the company earned $3.1 billion, or $7.09 a share.

Marathon Petroleum Corp.'s Quarterly Forecast
   Analysts' Estimates for Q4 2023  Q3 2023  Q4 2022
 Revenue  $35.2B  $41.6B  $40.1B
 Diluted EPS  $2.22  $8.28  $7.09
 Net income  $835.9M  $3.2B  $3.1B
Source: Visible Alpha
Pretax profit in the company's midstream pipeline unit likely rose 9% to $1.2 billion, according to Visible Alpha. But pretax earnings in its refining and marketing division, typically accounting for the bulk of Marathon's income, are projected to drop 86% to $566 million.

U.S. retail gasoline prices fell to an average of $3.48 per gallon in the fourth quarter, down from $3.87 in the third quarter and $3.68 in the fourth quarter of 2022. Gasoline prices slid throughout the latest quarter, dropping to $3.28 from $3.93 at the start of the period.

The U.S. Energy Information Administration predicts U.S. gasoline prices will average about $3.40 per gallon in 2024, down about 10 cents from 2023, as gasoline inventories increase.

Shares of Marathon Petroleum have gained about 20% in the past 12 months and have traded at record highs this month.

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  1. Visible Alpha. "."
  2. U.S. Energy Information Administration. ""
  3. U.S. Energy Information Administration. "."
  4. U.S. Energy Information Administration. "."
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