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Image Source: Marathon Petroleum corporate website.

Oh, Wall Street. You never cease to be irrational. Even though analysts put expectations on Marathon Petroleum (NYSE:MPC) earnings that would be extremely hard to achieve, the company just barely missed. While Marathon missing earnings might make for a good headline, what it masks is the fact that the company had a great quarter. Here's a quick snapshot of what happened at Marathon Petroleum this past quarter. 

By the numbers
Fully diluted earnings per share this quarter came in at $1.76. This was a pretty impressive gain compared to this time last year, but it actually failed to meet consensus analyst expectations of $1.80 per share. However, the company did realize a $0.17 per share writedown from the cancellation of its Residual Oil Upgrader Expansion project at one of its refineries. If we were to exclude that charge, Marathon's normalized earnings per share came in at a record-high $1.93 per share. 

Quarterly results (figures in millions except per share numbers) Q3 2015 Q2 2015 Q3 2014
Revenue $18,758 $20,537 $25,481
EBITDA $2,214 $1,761 $1,469
Net income attributable to shareholders $948 $826 $672
EPS (diluted) $1.76 $1.48 $1.18

Source: Marathon Petroleum earnings release.

Just because it missed expectations doesn't mean that investors should scoff at these numbers, though. Thanks to very favorable refining margins, Marathon was able to generate more than $1 billion in cash from operations, part of which it used to buy back $156 million worth of shares in the quarter. 

Catching up on the business this quarter

  • Management decided to cancel the development of its Residual Oil Upgrader Expansion project. The project was expected to cost $2.2 billion, but at this time management believes the current oil and gas market presents other investment opportunities.
  • The company has neared the completion of converting all Hess-branded retail stations to its Speedway brand. Close to 1,000 of the 1,245 stations have been converted to the Speedway brand and Marathon estimates the synergies of the conversion has saved the company $75 million annually
  • Marathon expects to finalize the consolidation of its own master limited partnership MPLX (NYSE:MPLX) and recent acquisition MarkWest Energy Partners (NYSE:MWE)
  • Marathon Petroleum moved the date of its Analyst Day presentation back one day to accommodate for a special meeting of MarkWest shareholders 
  • During the conference call, Marathon hinted at the possibility of "incubating" several of MarkWest's projects. Basically, it would develop some of the projects in MarkWest's backlog using cash generated from operations and then sell -- or "drop down" -- those developed assets to MarkWest. This is very similar to what it has been doing with projects it has dropped down to MPLX.

Outlook
Management didn't give too much guidance regarding future investments since it plans on holding its Analyst Day meeting on Dec. 3. It did, however, note that it was moving some of its planned drop downs to MPLX to 2016. It also gave a little guidance in relation to expected refining throughput for the coming quarter, which are expected to be down from this quarter because of planned maintenance and coming down from the summer driving season.

Mpc Guidance

Source: Marathon Petroleum investor presentation.

10-second takeaway
Don't let the titles that say Marathon missed expectations mislead you; this was an extremely solid quarter in the middle of an amazing time to be an oil refiner. With opportunities to invest in midstream and logistics assets through MPLX and MarkWest, Marathon looks like it has a pretty clear path for growth in any market environment. 

Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com or on Twitter @TylerCroweFool.

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