Marathon Petroleum Corporation (MPC) & Midcoast Energy Partners (NYSE:MEP) Critical Review

Midcoast Energy Partners (NYSE: MEP) and Marathon Petroleum Corporation (NYSE:MPC) are both energy companies, but which is the superior business? We will compare the two companies based on the strength of their valuation, earnings, dividends, institutional ownership, profitability, analyst recommendations and risk.

Profitability

This table compares Midcoast Energy Partners and Marathon Petroleum Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Midcoast Energy Partners -5.25% -34.51% -2.64%
Marathon Petroleum Corporation 1.34% 5.52% 2.45%

Valuation & Earnings

This table compares Midcoast Energy Partners and Marathon Petroleum Corporation’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Midcoast Energy Partners N/A N/A N/A ($1.76) -4.52
Marathon Petroleum Corporation $60.96 billion 0.41 $4.41 billion $1.76 28.24

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

Institutional and Insider Ownership

64.7% of Midcoast Energy Partners shares are held by institutional investors. Comparatively, 81.4% of Marathon Petroleum Corporation shares are held by institutional investors. 1.1% of Marathon Petroleum Corporation shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Midcoast Energy Partners and Marathon Petroleum Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Midcoast Energy Partners 0 1 0 0 2.00
Marathon Petroleum Corporation 0 2 11 1 2.93

Midcoast Energy Partners presently has a consensus price target of $8.00, indicating a potential upside of 0.63%. Marathon Petroleum Corporation has a consensus price target of $58.83, indicating a potential upside of 18.38%. Given Marathon Petroleum Corporation’s stronger consensus rating and higher possible upside, analysts plainly believe Marathon Petroleum Corporation is more favorable than Midcoast Energy Partners.

Dividends

Midcoast Energy Partners pays an annual dividend of $1.43 per share and has a dividend yield of 18.0%. Marathon Petroleum Corporation pays an annual dividend of $1.60 per share and has a dividend yield of 3.2%. Midcoast Energy Partners pays out -81.2% of its earnings in the form of a dividend. Marathon Petroleum Corporation pays out 90.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Midcoast Energy Partners has raised its dividend for 2 consecutive years and Marathon Petroleum Corporation has raised its dividend for 6 consecutive years. Midcoast Energy Partners is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk & Volatility

Midcoast Energy Partners has a beta of 2.53, meaning that its stock price is 153% more volatile than the S&P 500. Comparatively, Marathon Petroleum Corporation has a beta of 1.56, meaning that its stock price is 56% more volatile than the S&P 500.

Summary

Marathon Petroleum Corporation beats Midcoast Energy Partners on 12 of the 15 factors compared between the two stocks.

Midcoast Energy Partners Company Profile

Midcoast Energy Partners, L.P. (MEP) is a limited partnership company that is engaged in the natural gas and natural gas liquids (NGL) midstream business. It operates through two segments: Gathering, Processing and Transportation, and Logistics and Marketing. It also provides marketing services of natural gas and NGLs to wholesale customers. The Company’s gathering, processing and transportation business includes natural gas and NGL gathering and transportation pipeline systems, natural gas processing and treating facilities, condensate stabilizers and an NGL fractionation facility. Its logistics and marketing business provides marketing services of natural gas, NGLs and condensate received from its gathering, processing and transportation business. The Company holds interest in Midcoast Operating, L.P., a Texas limited partnership that owns a network of natural gas and NGL gathering and transportation systems, natural gas processing and treating facilities.

Marathon Petroleum Corporation Company Profile

Marathon Petroleum Corporation is engaged in refining, marketing, retail and transportation businesses in the United States and the largest east of the Mississippi. The Company operates through three segments: Refining & Marketing; Speedway; and Midstream. The Refining & Marketing segment refines crude oil and other feedstocks at the Company’s seven refineries in the Gulf Coast and Midwest regions of the United States. Its Speedway segment sells transportation fuels and convenience products in the retail market in the Midwest, East Coast and Southeast regions of the United States. The Company’s Midstream is engaged in the operations of MPLX LP and certain other related operations. It gathers, processes and transports natural gas, natural gas liquids (NGLs), crude oil and refined products. MPLX is a limited partnership which owns, operates, develops and acquires midstream energy infrastructure assets.

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