On Friday, Piper Sandler adjusted its price target for Marathon Petroleum (NYSE:NYSE:MPC) shares, lifting it to $204 from the previous $159 while maintaining a Neutral rating on the stock.
The firm's analyst noted that refining stocks are frequently questioned for their pricing, with a common assumption that they are factoring in another year of elevated margins for 2025. Contrary to this belief, the analyst suggests that the sector is still relatively inexpensive when looking at the longer term.
The analyst's commentary highlighted an updated assessment of the "mid-cycle" earnings power (EBITDA) for U.S. refiners, suggesting that the current stock prices are largely accounting for projected "mid-cycle" EBITDAs for the year 2025. This projection takes into account ongoing share buybacks, using the year-end 2025 estimated enterprise value (EV).
Among the small to mid-cap refiners, PBF Energy (NYSE:PBF) and HF Sinclair Corporation (previously known as HollyFrontier Corporation) are seen as having the largest discounts, while Phillips 66 (NYSE:NYSE:PSX) and Valero Energy (NYSE:NYSE:VLO) present the most long-term upside within the large-cap category.
Piper Sandler's adjustment in target prices across the refining sector reflects an anticipated increase in medium-term earnings power. However, the analyst also indicated that both market sentiment and the risk-reward balance have recently become more cautious. This change in outlook is attributed to the recent surge in stock prices and the seasonal trends that typically occur later in the business cycle.
In addition to Marathon Petroleum, Piper Sandler has also revised price targets for several other refiners. HF Sinclair Corporation's target has been set at $70, Par Pacific Holdings (NYSE:NYSE:PARR) at $47, PBF Energy (NYSE:PBF) at $61, and Phillips 66 at $187. These updates reflect the firm's analysis of the sector's financial prospects and stock performance expectations.
InvestingPro Insights
As Marathon Petroleum (NYSE:MPC) garners attention with Piper Sandler's recent price target adjustment, investors may benefit from additional insights provided by InvestingPro. The company's aggressive share buyback strategy, as noted in the InvestingPro Tips, could be a key factor in driving shareholder value. Additionally, the fact that 10 analysts have revised their earnings upwards for the upcoming period indicates a positive sentiment surrounding the company's financial prospects. This aligns with the analyst's view of the stock being inexpensive in the long term, considering its earnings power.
Looking at the real-time data, Marathon Petroleum boasts a healthy market capitalization of $77.92B and a P/E ratio of 9.1, which is lower than the adjusted P/E ratio for the last twelve months as of Q4 2023, suggesting a potentially undervalued stock. The company's revenue for the same period stands at a robust $149.35B, despite a decrease in revenue growth. Furthermore, with a dividend yield of 1.53% and a consistent track record of dividend payments for 14 consecutive years, Marathon Petroleum could be an attractive option for income-focused investors.
For those interested in diving deeper into Marathon Petroleum's financials and stock performance, additional InvestingPro Tips are available. By using the exclusive promo code PRONEWS24, readers can unlock a treasure trove of insights with an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With a total of 19 additional tips listed on InvestingPro, investors can gain a comprehensive understanding of Marathon Petroleum's market position and investment potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.