Back to top

Image: Bigstock

What's in Store for Marathon Oil's (MRO) Earnings in Q1?

Read MoreHide Full Article

Marathon Oil Corporation (MRO - Free Report) is scheduled to release first-quarter 2020 results on Wednesday May 6, after the closing bell.

The Zacks Consensus Estimate for the to-be-reported quarter’s loss is 13 cents per share and for revenues is $1.02 billion.

Against this backdrop, let’s delve into the factors that might have impacted the company’s performance in the March quarter.

As far as earnings surprises are concerned, this Houston, Texas-based Marathon Oil boasts an excellent record. Its bottom line surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark on one occasion, the average beat being 190.82%. 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

Factors at Play

Strong operational performance at Marathon Oil’s US resource basin division, which is responsible for more than three-fourth of its total production, is likely to have contributed to the first-quarter bottom line.

Notably, the Zacks Consensus Estimate for the company’s first-quarter total net sales volume is pegged at 412 thousand barrels of oil equivalent (boe/d), indicating an increase of 7% from the year-ago reported figure of 385 thousand boe/d.

Importantly, volume growth is likely to have been achieved on lower costs. During the fourth quarter, Marathon Oil’s U.S. production costs dipped 3.4% from the year-ago period to $5.13 per barrels of oil equivalent. Steady progress on the cost front, primarily on account of portfolio optimization efforts, might have aided the company’s bottom line in the to-be-reported quarter as well despite a weak oil price environment.

However, in the fourth quarter, Marathon Oil’s adjusted income from continuing operations lagged the Zacks Consensus Estimate owing to decreased average price realizations of crude oil and condensate from the International and North American E&P segments. This trend is anticipated to have continued in the first quarter too. The Zacks Consensus Estimate for first-quarter average price realizations of crude oil and condensate from the International E&P segment is pegged at $40.61 per barrel, suggesting a decline of 24.7% from $53.93 reported in the year-ago period. Similarly, the consensus mark for first-quarter average price realizations of crude oil and condensate from the North American E&P segment stands at $47.41 per barrel, implying a 12.3% fall from $54.05 reported a year earlier.

What Does Our Model Say?

Our proven Zacks model does not conclusively predict an earnings beat for Marathon Oil this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Marathon Oil has an Earnings ESP of 0.00%.

Zacks Rank: Marathon Oil carries a Zacks Rank #3.

Highlights of Q4 Earnings

Marathon Oil’s fourth-quarter 2019 results were disappointing as both earnings and revenues missed the respective Zacks Consensus Estimate. Weaker-than-expected net sales volumes caused this underperformance. Precisely, the same totalled 411 thousand barrels of oil equivalent per day (MBOE/d), falling short of the Zacks Consensus Estimate of 418 MBOE/d.

The company’s adjusted income from continuing operations came in at 7cents per share, lagging the Zacks Consensus Estimate of 8 cents. Moreover, the metric plunged nearly 53.3% from the year-ago earnings of 15 cents. Notably, decreased average price realizations of crude oil and condensate from the International E&P segment induced this year-over-year downside.

Quarterly revenues of $1,215 million fell shy of the Zacks Consensus Estimate of $1,267 million. The top line was also 31.2% lower than the prior-year figure of $1,765 million.

Stocks to Consider

While earnings outperformance looks uncertain for Marathon Oil, here are some firms worth considering from the energy space on the basis of our model, which shows that these have the right combination of elements to outpace estimates this reporting cycle:

Devon Energy Corporation (DVN - Free Report) has an Earnings ESP of +6.38% and a Zacks Rank of 3. The firm is scheduled to release earnings on May 5.

Comstock Resources, Inc. (CRK - Free Report) has an Earnings ESP of +2.63% and is Zacks #3 Ranked. The company is scheduled to release earnings on May 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Laredo Petroleum, Inc. has an Earnings ESP of +2.50% and is a #3 Ranked player. The firm is scheduled to release earnings on May 6.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Published in