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

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

Dividends

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Western Gas Partners pays an annual dividend of $3.68 per share and has a dividend yield of 8.7%. Marathon Petroleum pays an annual dividend of $1.84 per share and has a dividend yield of 2.6%. 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 pays out 48.4% of its earnings in the form of a dividend. Western Gas Partners has increased its dividend for 10 consecutive years and Marathon Petroleum has increased its dividend for 7 consecutive years. Western Gas Partners is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

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

Volatility and Risk

Western Gas Partners has a beta of 1.13, suggesting that its share price is 13% more volatile than the S&P 500. Comparatively, Marathon Petroleum has a beta of 1.33, suggesting that its share price is 33% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Western Gas Partners and Marathon Petroleum, as reported by MarketBeat.

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

Western Gas Partners currently has a consensus target price of $55.75, indicating a potential upside of 31.86%. Marathon Petroleum has a consensus target price of $81.25, indicating a potential upside of 13.16%. Given Western Gas Partners’ higher probable upside, analysts clearly believe Western Gas Partners is more favorable than Marathon Petroleum.

Valuation and Earnings

This table compares Western Gas Partners and Marathon Petroleum’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Western Gas Partners $2.25 billion 2.87 $567.48 million $1.30 32.52
Marathon Petroleum $75.37 billion 0.45 $3.43 billion $3.80 18.89

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.

Profitability

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

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

Summary

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

Western Gas Partners Company Profile

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.

Marathon Petroleum Company Profile

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.

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