Analyzing Marathon Petroleum (MPC) & Western Gas Partners (WES)

Marathon Petroleum (NYSE: MPC) and Western Gas Partners (NYSE:WES) are both oils/energy companies, but which is the superior stock? We will contrast the two businesses based on the strength of their earnings, profitability, valuation, risk, dividends, analyst recommendations and institutional ownership.

Volatility and Risk

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Marathon Petroleum has a beta of 1.34, meaning that its share price is 34% more volatile than the S&P 500. Comparatively, Western Gas Partners has a beta of 1.13, meaning that its share price is 13% more volatile than the S&P 500.

Earnings and Valuation

This table compares Marathon Petroleum and Western Gas Partners’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Marathon Petroleum $75.37 billion 0.46 $3.43 billion $3.80 19.07
Western Gas Partners $2.25 billion 2.88 $567.48 million $1.30 32.67

Marathon Petroleum has higher revenue and earnings than Western Gas Partners. Marathon Petroleum is trading at a lower price-to-earnings ratio than Western Gas Partners, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

80.3% of Marathon Petroleum shares are owned by institutional investors. Comparatively, 59.0% of Western Gas Partners shares are owned by institutional investors. 1.1% of Marathon Petroleum shares are owned by insiders. Comparatively, 0.0% of Western Gas Partners shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Dividends

Marathon Petroleum pays an annual dividend of $1.84 per share and has a dividend yield of 2.5%. Western Gas Partners pays an annual dividend of $3.68 per share and has a dividend yield of 8.7%. Marathon Petroleum pays out 48.4% of its earnings in the form of a dividend. Western Gas Partners pays out 283.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Marathon Petroleum has raised its dividend for 7 consecutive years and Western Gas Partners has raised its dividend for 10 consecutive years. Western Gas Partners is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of current recommendations and price targets for Marathon Petroleum and Western Gas Partners, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Marathon Petroleum 0 4 11 0 2.73
Western Gas Partners 0 5 7 0 2.58

Marathon Petroleum currently has a consensus price target of $81.25, indicating a potential upside of 12.15%. Western Gas Partners has a consensus price target of $55.75, indicating a potential upside of 31.27%. Given Western Gas Partners’ higher probable upside, analysts plainly believe Western Gas Partners is more favorable than Marathon Petroleum.

Profitability

This table compares Marathon Petroleum and Western Gas Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Marathon Petroleum 4.60% 9.90% 4.23%
Western Gas Partners 25.24% 14.38% 7.25%

Summary

Marathon Petroleum beats Western Gas Partners on 9 of the 17 factors compared between the two stocks.

About Marathon Petroleum

Marathon Petroleum Corporation, together with its subsidiaries, engages in refining, marketing, retailing, and transporting petroleum products primarily in the United States. It operates through three segments: Refining & Marketing, Speedway, and Midstream. It refines crude oil and other feed stocks at its six refineries in the Gulf Coast and Midwest regions of the United States; and purchases refined products and ethanol for resale. Its refined products include gasoline, distillates, propane, feed stocks and special products, heavy fuel oil, and asphalt. It also sells transportation fuels and convenience products in the retail market through Speedway convenience stores; gathers, processes, and transports natural gas; gathers, transports, fractionates, stores, and markets natural gas liquids (NGLs); and transports and stores crude oil and refined products. It markets its refined products to resellers, consumers, independent retailers, wholesale customers, its Marathon brand jobbers and Speedway brand convenience stores, airlines, transportation companies, and utilities. It also exports its refined products. As of December 31, 2017, it owned and operated 18 asphalt terminals and 61 light products terminals; 2,744 convenience stores in 21 states; 289 transport trucks and 296 trailers; 1,999 leased and 19 owned railcars; and owned/leased and operated 1,613 miles of common carrier crude oil and 2,360 miles of common carrier products pipelines, as well as had 5,617 retail outlets in 20 states and the District of Columbia, and interests in 2,194 miles of crude oil and 1,917 miles of products pipelines. It also owns and operates 228 miles of private products pipelines; has ownership interests in 739 miles of common carrier crude oil pipeline and 1,741 miles of products pipelines; and distributes refined products through approximately 130 light products and 2 asphalt third-party terminals. The company was incorporated in 2009 and is headquartered in Findlay, Ohio.

About Western Gas Partners

Western Gas Partners, LP acquires, develops, owns, and operates midstream energy assets in the Rocky Mountains, North-central Pennsylvania, and Texas. It is involved in gathering, processing, compressing, treating, and transporting natural gas, condensate, natural gas liquids, and crude oil. Western Gas Holdings, LLC serves as the general partner of Western Gas Partners, LP. The company was founded in 2007 and is headquartered in The Woodlands, Texas. Western Gas Partners LP is a subsidiary of Anadarko Petroleum Corporation.

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