Marathon Petroleum Corp. (NYSE:MPC)

The data reveals notable fluctuations and evolving trends in key operational efficiency metrics over the analyzed periods. These metrics, expressed through turnover ratios and average periods in days, provide insight into the company's asset management, credit policies, and overall working capital efficiency.

Inventory Turnover

The inventory turnover ratio shows a declining trend from early 2020 through mid-2021, reaching its lowest points around March 2021 at 7.91. This decline indicates slower inventory movement during this period. However, a recovery is visible beginning late 2021, with turnover ratios peaking at 17.18 by December 2022. Post-2022, the ratio stabilizes around 13, suggesting steady inventory management improvements.

Receivables Turnover

Receivables turnover decreases significantly from a high of 22.14 in June 2020 to a low of 8.98 in June 2021, reflecting lengthening collection periods or softer credit controls. Following this, the ratio rebounds strongly, achieving 17.18 by March 2023. Thereafter, a moderate decline and fluctuations occur, settling in the low teens by late 2024.

Payables Turnover

The payables turnover ratio exhibits a downward trend from a peak of 14.15 in June 2020 to a low near 6.27 in mid-2022, indicative of an extended payment period to suppliers. Subsequently, the ratio increases again to around 10.05 by September 2024, suggesting improved payment practices or shorter payables periods in recent quarters.

Working Capital Turnover

This metric shows significant volatility, dropping sharply from 55.5 in March 2020 to a low of 4.6 in June 2021. Post mid-2021, the ratio rises steadily, surpassing 20 by September 2024. The initial decline may correspond to challenges in efficiently utilizing working capital during early pandemic periods, with later steady gains reflecting enhanced operational efficiency and asset utilization.

Average Inventory Processing Period

The inventory processing period lengthened from 26 days in March 2020 to a peak of 46 days by March 2021, indicating slower stock turnover. Afterward, days decline steadily, reaching about 21 days by December 2022, suggesting improved inventory management and faster turnover. The period then remains relatively stable around 26-28 days through mid-2024.

Average Receivable Collection Period

Receivable collection days increase markedly from 17 days in early 2020 to a high of 42 days by March 2022, indicating slower customer payments or more lenient credit terms. Subsequently, collection periods shorten to around 26 days by late 2024, reflecting tighter credit collection practices or improved cash receipts.

Operating Cycle

The operating cycle lengthens from 43 days in March 2020 to a peak of 85 days by March 2021, reflecting slower inventory turnover and collection periods combined. It then decreases steadily to 54 days in March 2024, signaling enhanced synchronization of inventory and receivables management over time.

Average Payables Payment Period

The payable payment period extends from 28 days in March 2020 to a peak of 58 days in March 2022, implying the company is taking longer to settle supplier obligations, possibly to conserve cash. From mid-2022 onward, this period declines to 36 days by September 2024, suggesting a return to quicker supplier payments.

Cash Conversion Cycle

This cycle, representing the net time to convert resource inputs into cash flows, increases from 15 days in early 2020 to about 31 days by December 2020, then declines significantly to approximately 11-12 days throughout 2022. From 2023 forward, it remains stable around 14-18 days, indicating improved but steady cash flow management efficiency relative to the earlier period.

Overall, early 2020 to mid-2021 shows clear operational challenges with slower inventory and receivables management and longer payment periods, likely driven by broader economic disruptions. From late 2021 into 2024, the company demonstrates marked improvement in turnover ratios and reduction in cycle times, indicating enhanced efficiency in managing working capital components. The stabilization of cash conversion cycle near lower levels suggests effective cash flow control and balanced liquidity management in recent periods.

Cost of Revenues

The cost of revenues exhibits notable volatility over the observed periods. Initially, in early 2020, costs decreased sharply from $20,342 million in March to $11,502 million by June, followed by a gradual recovery through the end of 2020.

Throughout 2021, costs increased steadily, peaking in December at $32,184 million, reflecting a strong upward trend overall. In 2022, the cost of revenues remained high, reaching a maximum of $44,207 million in June before declining in subsequent quarters but staying elevated relative to earlier years.

For the period from 2023 to the first three quarters of 2024, costs display moderate fluctuations, generally maintaining a level between approximately $29,500 million and $34,900 million. This suggests a stabilization after the peak volatility experienced in 2021 and 2022, although the costs remain relatively high compared to the 2020 baseline.

Inventories

Inventory levels show a gradual upward trend from March 2020 to June 2022, rising from $7,445 million to $11,048 million, indicating a buildup of stock consistent with increasing operational scale or strategic inventory management.

Following this peak, inventories declined somewhat during the latter part of 2022, dropping to $8,827 million in December before fluctuating moderately in 2023 and early 2024 within a range of approximately $9,300 million to $10,268 million. This pattern suggests some inventory optimization or adjustments in supply chain management.

Overall, the inventory data reflects a cautious approach, with occasional drawdowns possibly aimed at balancing holding costs and operational needs amid market conditions.

Inventory Turnover Ratio

The inventory turnover ratio reveals an interesting dynamic across the periods. Starting at a high ratio of 14.05 in March 2020, it declined notably during mid-2020 down to a low of 7.91 in March 2021, indicating slower movement of inventory within that interval.

Subsequently, turnover improved through the remainder of 2021, reaching a peak of 17.18 in December 2022, which is indicative of faster inventory movement and possibly enhanced operational efficiency during that time.

In 2023 and early 2024, the ratio experienced some variability but mostly remained within the range of 12.77 to 14.21, suggesting a relatively stable turnover performance. The higher turnover ratios in later periods compared to the lows in early 2021 imply a recovery and improvement in inventory management efficiency over the medium term.

Summary Insights

The company’s cost of revenues and inventories show a marked response to external factors, with costs peaking around mid-2022 and inventories accumulating before a strategic reduction. The inventory turnover ratio reflects this underlying activity, with slower turnover during early 2021 followed by enhanced efficiency as turnover rose substantially toward late 2022.

This pattern suggests the organization successfully navigated fluctuations in supply chain and market demand, adjusting inventory levels and cost structures to optimize operational performance by late 2022 and maintaining relatively stable conditions through 2023 into early 2024.

Sales and other operating revenues

The revenue figures exhibit significant fluctuations across the examined periods, with a general upward trajectory from early 2020 through 2022, peaking in the second quarter of 2022 at 53,795 million US dollars. This peak is followed by a noticeable decline throughout late 2022 and 2023, though there are intermittent recoveries. The values at the end of the period, in mid to late 2024, show moderate volatility but do not return to the peak levels observed in mid-2022.

Receivables, less allowance for doubtful accounts

Receivables show a gradual increase from the first quarter of 2020, rising steadily with some quarter-to-quarter fluctuations, reaching a peak around mid-2022 at approximately 17,305 million US dollars. Following this high point, the receivables trend indicates a general decrease and moderation, settling at lower levels by the third quarter of 2024. This pattern suggests some correlation with the revenue trends, where increased sales volumes correspond to higher receivables.

Receivables turnover ratio

The turnover ratio demonstrates a declining trend from 21.12 in the first quarter of 2020 down to single-digit values in 2021, reaching its lowest around 8.64 in early 2022. Post this low, the ratio gradually improves, recovering to the mid-teens by early 2023 but experiences some fluctuations thereafter, maintaining values between 11 and 14 up to the third quarter of 2024. This trend reflects changes in the efficiency of receivables collection relative to sales, with a marked deterioration during 2020-2022 followed by a gradual recovery in subsequent periods.

Overall analysis

From the data, the company experienced volatile sales and revenue performance over the observed quarters, notably peaking in mid-2022 amidst rising receivables. The subsequent decline in both revenue and receivables suggests a period of contraction or normalization following a high growth phase. The receivables turnover ratio indicates that the efficiency in managing accounts receivable weakened substantially during the period of rising revenues and receivables in 2020-2022, before showing gradual improvement. Such dynamics imply that while sales growth was strong initially, challenges in collection efficiency arose, potentially requiring intensified credit management efforts to restore turnover performance. The trends collectively point to a cyclical pattern with an initial growth surge followed by regulatory or market adjustments impacting revenue and receivables management.

The analysis of the quarterly financial data reveals distinct trends in the cost of revenues, accounts payable, and payables turnover ratios over the examined periods.

Cost of Revenues

The cost of revenues exhibits considerable fluctuation across the quarters. Initially, it declined sharply from $20,342 million in March 2020 to a low point near mid-2020 at $11,502 million in June 2020. This was followed by a consistent upward trajectory from late 2020, peaking at $44,207 million in June 2022. Subsequently, the cost of revenues showed a declining trend toward the end of 2022 and early 2023, with moderate recovery phases afterward. Most recently, values have slightly tapered off again by September 2024, indicating periodic volatility but an overall upward movement when comparing early 2020 to later periods.

Accounts Payable

Accounts payable follow a broadly similar pattern with a substantial increase observed from approximately $6,110 million in mid-2020 to a peak of about $22,502 million in June 2022. After reaching this peak, there is a noticeable decline through late 2022 and early 2023, with fluctuations apparent through 2023 and into 2024. This movement suggests that liabilities to suppliers increased markedly as the company’s cost of revenues increased, before moderating somewhat in the more recent periods.

Payables Turnover Ratio

The payables turnover ratio, which measures the frequency of accounts payable being paid within a period, started relatively high at 12.91 in March 2020, with a spike up to 14.15 in June 2020. This ratio then declined sharply to a low of 6.27 in both March and June 2022, correlating with the peak in accounts payable balance and cost of revenues. A gradual recovery in turnover is noticed from late 2022 onwards, with values ranging between approximately 8 and 11 in 2023 and 2024, denoting improvements in the payment cycle efficiency compared to the low point but still lower than the early 2020 levels.

Overall, the data indicate that the company experienced significant operational expansion or increased input costs through 2021 and early 2022, marked by rising cost of revenues and accounts payable. This period also saw a slower payment cycle as denoted by the reduced payables turnover ratio. The subsequent period reflects efforts to manage or reduce costs and accounts payable balances, alongside improving turnover ratios, suggesting enhancements in working capital management. However, the turnover ratios have yet to return to the higher efficiency levels observed in early 2020.

The analysis of the quarterly financial metrics reveals distinct trends in the company's operational efficiency and liquidity management over the observed periods.

Working Capital

Working capital exhibited a generally volatile trend. It started at 2,124 million US dollars, increased substantially and peaked around the second quarter of 2021 at approximately 19,080 million US dollars. Subsequently, it showed a steady decline, falling to 4,881 million US dollars by the third quarter of 2024. This pattern suggests fluctuating liquidity availability with a notable decrease in recent periods.

Sales and Other Operating Revenues

Sales and other operating revenues demonstrated a significant rising trend, particularly from the first quarter of 2020 through mid-2022. Revenues climbed steadily from 22,204 million US dollars to a peak of 53,795 million US dollars in the second quarter of 2022. After this peak, revenues experienced a decline, followed by fluctuations but remained relatively high compared to the initial periods, ending at 35,107 million US dollars in the third quarter of 2024. This indicates strong revenue growth with some volatility in recent quarters.

Working Capital Turnover

The working capital turnover ratio showed a clear upward trend over the timeframe. Starting at a high of 55.5 in the first quarter of 2020, the ratio sharply declined to a low around the fourth quarter of 2020 (approximately 5.53), indicating a period of increasing working capital relative to sales. From 2021 onward, the ratio trended upward steadily, reaching 29.09 by the third quarter of 2024. This improvement in turnover suggests enhanced efficiency in utilizing working capital to generate sales in the later periods.

Overall, the data points to an initial strategy of increasing working capital along with revenues, followed by a period of optimizing working capital utilization as seen in improved turnover ratios. The decline in working capital paired with relatively stable revenues and increasing turnover ratio in recent quarters signifies better capital management and operational efficiency gains.

Inventory Turnover Ratio

The inventory turnover ratio demonstrates a general fluctuating trend over the analyzed periods. Initially, the ratio decreases from 14.05 at March 31, 2020, to a low of 7.91 by March 31, 2021. This declining trend indicates a slowdown in the frequency of inventory renewal during that year. Subsequently, there is a recovery phase where the ratio increases steadily, peaking at 17.18 in December 31, 2022. After this peak, the ratio stabilizes somewhat, remaining within the range of approximately 12.77 to 14.21 through March 31, 2023, and then slightly decreasing but maintaining a consistent level near 13 towards the latest quarter ending September 30, 2024.

Average Inventory Processing Period (Days)

The average inventory processing period, expressed in days, exhibits an inverse relationship with the inventory turnover ratio. The period starts relatively low at 26 days in March 31, 2020, increases steadily to a peak of 46 days at March 31, 2021, indicating that inventory was held longer during this time frame. Following this peak, the period decreases sharply to 21 days by December 31, 2022, aligning with the period of highest turnover ratio. Thereafter, the processing period fluctuates within a narrow band, generally between 26 and 29 days through to September 30, 2024, suggesting a more stable inventory management practice in the more recent periods.

Overall Analysis

The data reflects periods of both reduced and heightened inventory efficiency. The early period of the data set shows a noticeable slowdown in inventory circulation, with the company taking longer to process inventory. The turnaround seen after the first quarter of 2021 indicates improvements in inventory management or sales velocity. Post-2022, the metrics suggest the company has reached a relatively steady state in its inventory cycles, maintaining moderate turnover rates with reasonably consistent inventory processing durations. These patterns may reflect adaptations to market conditions, supply chain dynamics, or operational strategy evolving over the analyzed quarters.

The analysis of the quarterly financial data reveals significant trends in the management of receivables over the examined periods. Two key metrics are considered: the receivables turnover ratio and the average receivable collection period, which together provide insights into the company's efficiency in collecting outstanding receivables.

Receivables Turnover Ratio

The receivables turnover ratio exhibited a general downward trend from early 2020 through the first half of 2021, indicating a gradual decline in the frequency of collections during this period. Starting at 21.12 in March 2020, the ratio decreased sharply to a low near 8.98 by June 2021. Subsequently, the ratio showed some recovery, oscillating between approximately 10.79 and 13.95 from the latter part of 2021 through 2024. Despite this partial rebound, the turnover ratio remains below early 2020 levels, suggesting a more extended time to collect receivables compared to the pre-2021 period.

Average Receivable Collection Period

The average receivable collection period closely mirrors the inverse trend of the turnover ratio. Starting from a relatively low 17 days in March 2020, it increased steadily, reaching a peak of 42 days around March 2022. This indicates a longer duration for receiving payments from customers in that timeframe. Post-2022, the collection period started to contract gradually, moving towards approximately 26 days by September 2024. This improvement signals enhanced effectiveness in collections, yet the current collection period remains elevated relative to the initial measurement in 2020, implying ongoing challenges in receivables management.

Overall Insights

The inverse relationship between the receivables turnover ratio and the average collection period is evident, reflecting typical financial behavior. The data suggests that the company faced decreasing efficiency in receivables collection during the pandemic and its immediate aftermath, with slower turnovers and longer collection intervals. However, gradual improvements from 2022 onward indicate a recovery in liquidity management and collection practices. Despite progress, the company has not fully returned to the pre-2020 level of receivables management efficiency.

Average Inventory Processing Period

The average inventory processing period exhibited a fluctuating trend over the observed periods. Initially, it increased from 26 days in the first quarter of 2020 to a peak of 46 days by the first quarter of 2021. After this peak, a downward trend was observed, reaching a low of 21 days at the end of 2022. Subsequently, the metric stabilized around the mid to high 20s, fluctuating between 26 and 29 days through mid-2024. This pattern suggests an initial lengthening of inventory turnover time, followed by significant improvements and stabilization in inventory management efficiency.

Average Receivable Collection Period

The average receivable collection period showed considerable variability throughout the periods. It started relatively low at 17 days in early 2020 but rose steadily to a high of 42 days by the first quarter of 2022, indicating slower collection of receivables during this phase. Following this peak, a notable improvement occurred, with the collection period decreasing to 21 days in early 2023. However, there was some increase again post this trough, with periods ranging from 24 to 33 days, before reducing slightly to 26 days by mid-2024. The fluctuations reflect shifts in the efficiency of receivables management, with periods of both elongation and improvement.

Operating Cycle

The operating cycle lengthened progressively from 43 days in the first quarter of 2020 to a peak of 85 days in early 2021, aligning with the increased inventory and receivables periods seen during this timeframe. Post-peak, the operating cycle experienced a steady contraction, dropping to 47-50 days around the first half of 2023. Nevertheless, moderate increases followed, with values hovering between 54 and 61 days through mid-2024. Overall, the operating cycle reflects an initial expansion in the time taken to convert inventory and receivables into cash, followed by phases of operational tightening and some renewed lengthening in the most recent quarters.

Summary

The financial cycle metrics indicate an initial period characterized by slower turnover and collection processes, culminating in longer operating cycles during 2020 and early 2021. Improvement efforts appear to have effectively reduced inventory processing and receivable collection periods around late 2022 and early 2023, resulting in a more efficient operating cycle. However, the latter part of the timeline reveals some volatility and slight reversals in these gains, suggesting ongoing challenges in maintaining optimal working capital management. This trend underscores the importance of continuous focus on inventory control and receivables collection to sustain operational efficiency.

Payables Turnover Ratio Trends

The payables turnover ratio demonstrated substantial fluctuations across the periods analyzed. Initially, the ratio was relatively high at 12.91 in March 2020, peaking at 14.15 in June 2020. Subsequently, the ratio experienced a significant decline, reaching a low of 6.27 in both March and June 2022. Thereafter, the ratio showed recovery, climbing back to 11.2 by March 2023. The ratio then displayed moderate variability, settling around values between 8.18 and 10.05 from the end of 2023 through the third quarter of 2024. Overall, the data indicates periods of both faster and slower payment cycles, with improved payables turnover observed towards the latter periods.

Average Payables Payment Period Trends

The average payables payment period showed an inverse pattern relative to the payables turnover ratio, consistent with the relationship between these metrics. Initially, the payment period was relatively short at 28 days in March 2020, contracting slightly to 26 days in the following quarter. Then, a notable extension occurred, with the payment period lengthening significantly to 55 days by March 2021. This elevated payment period was maintained around similar levels until mid-2021 before decreasing to about 33 days by March 2023. Post this trough, the payment period increased again to a peak of 45 days towards the end of 2023. In the most recent quarters, the payment period has shown a tendency to decrease slightly, reaching 36 days by September 2024. This suggests a pattern of fluctuating credit terms or payment practices over time, with a recent trend toward moderately shorter payment durations.

Analysis of Patterns and Implications

The inverse relationship between the payables turnover ratio and the average payment period is evident, consistent with industry norms. Periods of lower payables turnover align with longer average payment durations, implying slower payments to suppliers, while higher turnover corresponds with quicker payments. The initial volatility in 2020 likely reflects external economic factors impacting supplier payments. The mid-2021 peak in payment days may indicate strategic supplier negotiations or cash flow management adjustments. The recovery in turnover and shortening payment periods in 2023 suggests an increased emphasis on settling payables more promptly. However, recent moderate fluctuations hint at ongoing adjustments in working capital management.

The financial analysis over several quarters reveals notable fluctuations and trends in the operational efficiency metrics.

Average Inventory Processing Period

The average inventory processing period experienced a peak in late 2020 and early 2021, reaching up to 46 days in the first quarter of 2021. Following this, there is a clear downward trend through 2022, reducing to a low of 21 days by the end of that year. Into 2023 and early 2024, the period stabilizes between 26 and 29 days, indicating improved inventory turnover efficiency compared to the earlier peaks.

Average Receivable Collection Period

The collection period shows a more volatile pattern. Initially, it rises significantly from 17 days in the first quarter of 2020 to a peak of 42 days in the first quarter of 2022. After this peak, there is a general decline towards 26 days by the third quarter of 2024, though some fluctuations occur in the interim. This trend suggests an improvement in receivables management and faster collection in recent quarters following a period of extended collection times.

Average Payables Payment Period

The payment period shows considerable variability, with the highest values observed around the first half of 2022, reaching 58 days. This period is longer compared to earlier quarters, implying extended credit terms or delays in payables during that time. Moving into 2023 and through mid-2024, the payment period trends downward, stabilizing between 36 and 45 days. This reduction indicates a gradual tightening of payment schedules or improved management of payables obligations.

Cash Conversion Cycle

The cash conversion cycle remains relatively stable throughout the period, fluctuating between 11 and 31 days. After peaking at 31 days in the last quarter of 2020, it demonstrates a consistent decline to around 12 days by the end of 2022. From 2023 onwards, this figure maintains a narrow range of 14 to 18 days, reflecting a stable and relatively efficient conversion of resources into cash. This consistency suggests improved overall working capital management despite the earlier volatility in individual components.

In summary, the data indicates that there were periods of operational inefficiency in inventory processing and receivables collection around 2020 and early 2022. Since then, there has been a general improvement, with reduced inventory days and faster receivable turnover. Payables payment periods extended significantly in some quarters but started to normalize afterwards. The cash conversion cycle, an aggregate measure, shows a trend towards stability and efficiency in recent quarters.