Our first idea is an energy company that has a current dividend yield of 3.12%, paid quarterly. Our second recommendation is a sale of a previous idea.
Buy: Marathon Petroleum Corporation (MPC)
From Cabot Undervalued Stocks Advisor
Marathon Petroleum Corporation (MPC) is a leading integrated downstream energy company and the nation’s largest energy refiner, with 16 refineries, majority interest in a midstream company, 10,000 miles of oil pipelines and product sales in 11,700 retail stores. Marathon has prepared their refining system for upcoming IMO 2020 regulations, and is confident in their ability to produce large amounts of ultra-low-sulfur diesel fuel to meet the new demand.
Activist investors are urging the Board of Directors to split Marathon into three entities: Speedway, refining operations and midstream holdings. The financial media reported that the Board of Directors met with activist investors last week to discuss their suggestions, including potentially replacing CEO Gary Heminger with Executive Vice Chairman Greg Goff. Investors will likely hear more on this topic during the third-quarter earnings conference call.
MPC is an undervalued large-cap stock. The company is expected to report third-quarter EPS of $1.41, within a range of $1.02-$2.16, on the morning of October 31. Expect volatility. Full-year EPS are expected to fall 35% 2019, then rise 84% in 2020. The 2020 P/E is low at 8.9. Last week, Citigroup raised their price target on MPC from 60 to 71, which is a rather large increase, although to me that seems more like chasing and less like forecasting. MPC has begun a new run-up that could take the stock to 77 before year end. Buy MPC now. Strong Buy.
Crista Huff, Cabot Undervalued Stocks Advisor, www.cabotwealth.com, 978-745-5532, October 22, 2019