October 30, 2019 / 4:17 PM / 14 days ago

Marathon heads into earnings targeted by activist investors

(Reuters) - Marathon Petroleum Corp will release earnings on Thursday at a time when activist investors are pressuring company executives to make major changes, including potentially spinning off its retail gasoline unit that enjoyed strong margins in the most recent quarter.

It has been 13 months since Marathon closed its $23 billion purchase of Andeavor Corp that gave it a presence across the entire United States, making it the second-largest independent refiner by market value after Phillips 66.

Now, activist investors, including Elliott Management Corp, have called for asset sales and corporate changes, including the potential removal of current chief executive Gary Heminger. Bloomberg reported Wednesday that the company’s board may try to appoint a new CEO to appease Elliott. Reuters has not independently confirmed that.

When Marathon executives speak on an analyst call on Thursday, they are expected to address Elliott’s claim that the refiner could unlock up to $40 billion in shareholder value.

The company is expected to report earnings of $1.38 per share according to analysts polled by Reuters. The Refinitiv Eikon SmartEstimate, which weighs analysts with a higher degree of accuracy, forecasts earnings of $1.33 a share.

Analysts expect Marathon to report a strong retail performance after peer refiner Phillips 66 beat analysts estimates last week because of stronger retail fuel margins.

Elliott called for Marathon to spin off retail and logistics assets in September, three years after the hedge fund first asked the refiner to consider spinning off businesses. [L3N26G31S]

“If Marathon doesn’t put up a big number on retail it is going to prompt a few more questions about its integrated business model,” said Matthew Blair, an analyst at Tudor, Pickering & Holt.

Shares of the Findlay, Ohio-based company have fallen 6% this year, compared with a 7.4% gain in the S&P oil and gas refining and marketing index.

Independent refiners convert crude to products like gasoline and diesel, but do not extract crude. Refiners’ margins can fall when crude becomes more expensive.

Reporting by Laura Sanicola; Editing by David Gregorio

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