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Texas Oil & Gas Firm Positioned for Faster Growth with Potential Upside
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Raymond James provided a general outlook on this company post-merger and pre-Investor Day.

Oil pump

In a Nov. 20 research note, analyst Justin Jenkins observed that with the Andeavor acquisition behind it, Marathon Petroleum Corp. (MPC:NYSE) is "uniquely positioned to continue optimizing its now industry-leading refining position while creating even faster growth in the higher-value Midstream and Retail segments."

Jenkins explained that Marathon should benefit from upside related to merger synergies and "a strengthened refining suite that is well positioned for wide crude differentials and IMO 2020," referring to the International Maritime Organization's 0.5% global sulphur cap on marine fuels effective Jan. 1, 2020. Further upside should result from "robust opportunities" in the Speedway and Midstream segments.

At the same time, headwinds, specifically current weak gasoline margins, are expected.

Jenkins relayed what Raymond James expects Marathon to provide on its Investor Day and what it would like Marathon to provide on Investor Day. The former are:

  1. An update and overview of synergies and growth targets resulting from the Andeavor merger. Jenkins noted the estimated synergies target could be higher than the previously discussed $1 billion.
  2. Further details on the current refining market and margins outlook and expectations regarding IMO 2020.
  3. Updated guidance for Q4/18 and 2019 operations and reporting outlook.
  4. Capital allocation plans.

"If new guidance figures and capital allocation outlook are well received, a bounce in shares could be due," Jenkins asserted.

A detailed explanation of Marathon's free cash flow profile would be helpful to investors, Jenkins wrote, because the company's reporting structure is complex and numerous changes have resulted from the Andeavor acquisition.

Raymond James maintains its Strong Buy rating and its $106 per share target price on Marathon, whose share price today is around $65.95.


1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from Raymond James, Marathon Petroleum Corp., November 20, 2018


Analyst Holdings and Compensation: Equity analysts and their staffs at Raymond James are compensated based on a salary and bonus system. Several factors enter into the bonus determination including quality and performance of research product, the analyst's success in rating stocks versus an industry index, and support effectiveness to trading and the retail and institutional sales forces. Other factors may include but are not limited to: overall ratings from internal (other than investment banking) or external parties and the general productivity and revenue generated in covered stocks.

The views expressed in this report accurately reflect the personal views of the analyst(s) covering the subject securities. No part of said person's compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. In addition, said analyst has not received compensation from any subject company in the last 12 months.

Raymond James expects to receive or intends to seek compensation for investment banking services from the subject companies in the next three months.
Raymond James & Associates makes a market in shares of MPC.
Raymond James & Associates received non-investment banking securities-related compensation from MPC within the past 12 months.

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