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Factors Likely to Affect Marathon (MRO) This Earnings Season

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Marathon Oil Corporation (MRO - Free Report) is set to release second-quarter 2021 results after the closing bell on Aug 4. The current Zacks Consensus Estimate for the to-be-reported quarter is 18 cents per share on revenues of $1.15 billion.

Let’s delve into the factors that might have influenced the independent oil and gas producer’s performance in the June quarter. But it’s worth taking a look at Marathon’s previous-quarter performance first.

Highlights of Q1 Earnings & Surprise History

In the last-reported quarter, the Houston, TX-based upstream player beat the consensus mark on stringent cost control and better-than-expected contribution from its International E&P segment. Marathon oil had reported adjusted net income per share of 21 cents that went past the Zacks Consensus Estimate of 13 cents. The company’s quarterly revenues of $1.1 billion underperformed the Zacks Consensus Estimate by 1.79% though, primarily due to lower production.

Marathon beat the Zacks Consensus Estimate in three of the last four quarters and met in the other, delivering an earnings surprise of 26.19%, on average. This is depicted in the graph below:

Marathon Oil Corporation Price and EPS Surprise

Marathon Oil Corporation Price and EPS Surprise

Marathon Oil Corporation price-eps-surprise | Marathon Oil Corporation Quote

Trend in Estimate Revision

The Zacks Consensus Estimate for the second-quarter bottom line has been revised 12.5% upward in the last seven days. The estimated figure indicates a 130% improvement year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 321.89% surge from the year-ago period.

Factors to Consider

According to the U.S. Energy Information Administration, in April, May and June of 2020, the average monthly WTI crude price was $16.55, $28.56 and $38.31 per barrel, respectively. In 2021, the average prices were $61.72 in April, $65.17 in May and $71.38 in June, i.e., much stronger year over year.

The news is also bullish on the natural gas front. In Q2 of 2020, U.S. Henry Hub average natural gas price was $1.74 per MMBtu in April and rose marginally to $1.75 in May before tumbling to $1.63 in June. Coming to 2021, the fuel traded at $2.66, $2.91 and $3.26 per MMBtu, in April, May and June, respectively. In other words, natural gas traded noticeably higher in all the three months.

This price boost is likely to have buoyed up the second-quarter results of upstream operator Marathon Oil.

But on a somewhat bearish note, the company is likely to have faced a decline in production. Marathon’s net sales volumes totaled 341,000 barrels of oil equivalent per day (BOE/d) in the first quarter. This reflected an 18.6% drop from the year-ago quarter’s output of 419,000 BOE/d. This year-over-year decline is most likely to have continued in the second quarter due to fewer wells brought to sales, particularly in the Bakken. This might impact Marathon Oil’s revenues and cash flows in the second quarter.

What Does Our Model Say?

The proven Zacks model does not conclusively show that Marathon is likely to beat estimates in the second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company is -0.55%.

Zacks Rank: Marathon currently carries a Zacks Rank #2.

Stocks to Consider

While an earnings beat looks uncertain for Marathon oil, here are some firms from the energy space that you may want to consider on the basis of our model:

Continental Resources, Inc. (CLR - Free Report) has an Earnings ESP of +2.77% and is Zacks #1 Ranked. The firm is scheduled to release earnings on Aug 2.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Devon Energy Corporation (DVN - Free Report) has an Earnings ESP of +0.15% and a Zacks Rank #1. The firm is scheduled to release earnings on Aug 3.

EOG Resources, Inc. (EOG - Free Report) has an Earnings ESP of +0.50% and a Zacks Rank #1. The firm is scheduled to release earnings on Aug 5.