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What's in Store for Marathon Oil (MRO) This Earnings Season?

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Marathon Oil Corporation (MRO - Free Report) is set to release fourth-quarter 2017 results after the closing bell on Feb 14.

In the last quarter, the Houston, TX-based company reported a lower-than-expected loss on lower production from the U.S. land markets and higher price realizations.

Moreover, the company also flaunts a solid earnings surprise history. Marathon Oil surpassed earnings estimates in three of the last four quarters, with an average beat of 1.75%.

Let’s see how things are shaping up for this announcement.

Marathon Oil Corporation Price and EPS Surprise

 

Marathon Oil Corporation Price and EPS Surprise | Marathon Oil Corporation Quote

Factors at Play

Marathon Oil’s strong inventories of development projects poise it for growth. The company has been improving the quality of assets and is well positioned to augur production.The company has successfully positioned itself into the Delaware Basin and STACK/SCOOP resource plays while exiting the oil sands and conventional assets with limited upside.

Notably, driven by the robust performance in the last quarter, Marathon Oil raised its production guidance for 2017 to 350,000-360,000 barrels of oil equivalent per day (BOE/d) and expects the total production to end the year toward the top end of the revised guidance.

In fact, the Zacks Consensus Estimate for total sales volume for the fourth quarter is 390,000 BOE/d. However, this figure is lower than 409,000 BOE/d and 419,000 BOE/d recorded in the prior quarter and the year-ago quarter.

While the company is likely to benefit from higher production in the North American market, output in the international markets may hurt revenues. The current Zacks Consensus Estimate for the quarterly output in North American market is pegged at 261,000 BOE/d, higher than the 244,000 BOE/d and 212,000 BOE/d reported in the prior quarter and the year-ago quarter. However, the Zacks Consensus Estimate for the international sales volume is 134,000 BOE/d, reflecting a decline of 18.8% and 7.6% sequentially and year-over-year, respectively.

Further, the North American market is likely to benefit from higher commodity price realizations. The Zacks Consensus Estimate for crude price realization is pegged at $49.70 per barrel, higher than the $46.65 per barrel and $45.89 a barrel recorded in third quarter of 2017 and fourth-quarter 2016, respectively. The natural gas price realizations in the North American markets is also pegged higher, both sequentially and year-over year, at $2.93 per thousand cubic feet (Mcf).

Meanwhile, lower price realizations from the international markets are likely to put the company’s earnings under pressure. The Zacks Consensus Estimate for crude price realization is pegged at $43.83 a barrel for this quarter, down 14% and 5.6% sequentially and year-over-year.

Earnings Whispers

Our proven model does not conclusively show that Marathon Oil will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -6.25%.

Zacks Rank: Marathon Oil carries a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.

Conversely, we caution against Sell-rated stocks (Zacks Ranks #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks with Favorable Combination

Though an earnings beat looks uncertain for Marathon Oil, here are some firms from the energy space you may want to consider as our model shows that these have the right combination of elements to post earnings beat:

Keane Group (FRAC - Free Report) has an Earnings ESP of +14.79% and carries a Zacks Rank #2. The partnership is likely to report fourth-quarter earnings numbers on Feb 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

Enbridge (ENB - Free Report) has an Earnings ESP of +3.88% and a Zacks Rank #3. The midstream operator is anticipated to release fourth-quarter earnings on Feb 16.

Continental Resources (CLR - Free Report) has an Earnings ESP of +0.68% and a Zacks Rank #1. The midstream operator is anticipated to release fourth-quarter earnings on Feb 21.

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