Marathon Oil Corporation MRO is scheduled to release financial results for the fourth quarter on Feb 21, with the current Zacks Consensus Estimate projecting a profit of 62 cents per share on revenues of $1.7 billion.
As investors await this announcement, it’s essential to explore the factors that might have influenced the independent oil and gas producer’s performance from October to December. However, understanding MRO’s previous-quarter results is crucial for context.
Reviewing Q3 Performance & Surprise History
In the previous quarter, the Houston-based upstream player outperformed the consensus mark on the back of robust domestic oil and gas production, complemented by lower unit costs. Marathon Oil reported adjusted earnings per share of 77 cents, surpassing the Zacks Consensus Estimate of 69 cents. Furthermore, the firm’s revenues of $1.8 billion exceeded the Zacks Consensus Estimate by 3.4%.
Marathon Oil has consistently surpassed the Zacks Consensus Estimate for earnings over the last four quarters, resulting in an average earnings surprise of 12.7%. This stellar track record is visually depicted below:
Marathon Oil Corporation Price and EPS Surprise
Marathon Oil Corporation price-eps-surprise | Marathon Oil Corporation Quote
Estimate Revision Trends
The Zacks Consensus Estimate for MRO’s Q4 bottom line has remained unchanged in the past week, indicating an estimated 29.6% decline year over year. Additionally, the revenue estimate suggests a 4.3% decrease from the same period last year.
Factors Affecting Performance
The anticipated decline in oil and natural gas realizations is expected to have impacted Marathon Oil’s revenues and cash flows. For instance, our model projects MRO’s Q4 U.S. E&P segment’s realized average liquids price to drop to $77.80 per barrel from $84.29 year over year. Furthermore, the projection for the average realized natural gas prices reflects a 42.4% decrease from the previous year.
Conversely, the company’s increased costs may have negatively impacted its bottom line. Notably, our estimate for production cost indicates an 11.2% increase from the year-ago level, with total expenses expected to rise by 9.6% to $1.1 billion. The upward cost trajectory can be attributed to the prevailing inflationary environment and a tight labor market.
Nevertheless, Marathon Oil is likely to have benefited from higher output. Considering MRO’s impressive production profile from its high-margin U.S. resource plays, our expectation for the company’s Q4 volume is pegged at around 396,000 barrels of oil equivalent per day (BOE/d), marking a robust 19.1% increase from the previous year’s level of 333,000 BOE/d.
Forecast from Our Model
According to the proven Zacks model, there is no conclusive evidence to believe that Marathon Oil is likely to beat estimates in the coming quarter. While a positive Earnings ESP combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the likelihood of beating estimates, this is not the case for MRO.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP for Marathon Oil is estimated at -1.78%
Zacks Rank: MRO currently holds a Zacks Rank #5 (Strong Sell).
Promising Alternatives
While the prospect of an earnings beat for Marathon Oil seems uncertain, there are other firms worthy of consideration based on our model:
Ardelyx, Inc. ARDX, which has an Earnings ESP of +9.80% and a Zacks Rank #2, is slated to release earnings on Feb 22.
Inter Parfums, Inc. IPAR has an Earnings ESP of +5.71% and a Zacks Rank #2, with its earnings release scheduled for Feb 27.
Cheniere Energy LNG holds an Earnings ESP of +5.55% and a Zacks Rank #3, with its earnings release also set for Feb 22.
With the anticipation of upcoming earnings announcements, keeping abreast with the Zacks Earnings Calendar is advised.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
