A Marathon sign is seen outside Marathon Petroleum (MPC.N) Detroit refinery in Detroit, Michigan U.S., September 9, 2024. REUTERS/Rebecca Cook

By Pooja Menon

(Reuters) -U.S. refiner Marathon Petroleum on Tuesday missed Wall Street estimates for third-quarter adjusted profit, as higher refining turnaround costs offset stronger refining margins, sending its shares down more than 7.5% in early trading.

The disappointing results contrast with rivals Valero Energy, Phillips 66 and HF Sinclair, which exceeded Wall Street estimates on a recovery in margins.

Marathon's results, however, underscore U.S. refiners' challenges as elevated maintenance costs and inflation eat into earnings despite strong demand and wider margins.

Its quarterly refining turnaround costs, typically associated with periodic maintenance shutdowns, were $400 million, compared with $287 million last year.

The company expects these costs to rise to $420 million in the fourth quarter.

Piper Sandler analysts said the miss was "likely to disappoint the market" due to its rarity, given the company's strong track record.

TD Cowen said was the results were "negative" as the rare earnings miss came amid broader refining outperformance. The brokerage also noted the free cash flow was $600 million below consensus due to higher capex.

Refining and marketing margin per barrel was up at $17.60 in the quarter, compared with $14.63 from a year earlier.

Marathon's refining and marketing segment reported a quarterly adjusted core profit of $1.76 billion, compared with $1.14 billion a year ago.

Its crude oil capacity utilization was 95% in the quarter, compared with 94% a year ago, while throughput volumes of 3.0 million barrels per day (mmbpd) were unchanged.

The refiner expects total throughput volumes of 2.9 mmbpd in the fourth quarter.

Marathon expects to spend $200 million this year on its Galveston Bay Refinery in Texas, with another $575 million in the next two years.

The company reported an adjusted profit of $3.01 per share for the quarter, compared with analysts' average estimate of $3.15 per share, according to data compiled by LSEG.

(Reporting by Pooja Menon in Bengaluru; Editing by Leroy Leo)