We value MPC using an average of three valuation methodologies enabling us to consider both long-term and near-term outlook as well as various valuation techniques used by investors and management teams. We apply EV/EBITDA and P/E multiples of 6x and 10x, respectively, to our 2025 and 2026 EBITDA and EPS estimates. Our DCF uses a 6.5% weighted average cost of capital and a 1% terminal growth rate. Our price target of $199 is the average price target of all three methodologies.

Although MPC has high commodity risk and high earnings volatility, it has relatively lower risk with a strong and seasoned executive team, predictable cash flows from  its midstream assets, strong balance sheet, and relatively low cost structure. Downside risks to our target price include: Sour crude—The company is weighted toward sour crude. As light-heavy crude differentials narrow, the benefits of a more complex refinery will diminish, which may delay return on investment. It is also more costly to run sour crude. Margin correction—MPC is vulnerable to a refining margin correction. This could occur if demand for refined products is weaker than expected in the event of a recession and/or due to global refinery capacity additions.
Upside risks to our target price include: Light-heavy differentials—Because MPC is a complex US refiner, its earnings benefit when light-heavy differentials widen. Midcontinent and Midwest Exposure—MPC refining assets are concentrated in the PADD II market. PADD II may continue to benefit from comparatively cheap crude oil.