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Is a Beat Likely for Marathon Oil (MRO) in Q3 Earnings?

Zacks Equity Research

Marathon Oil Corporation MRO is set to release third-quarter 2019 results after the closing bell on Wednesday, Nov 6. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of 4 cents per share on revenues of $1.3 billion.

While the Zacks Consensus Estimate for third-quarter earnings has been revised downward 63.6% in the past 30 days, we expect the company to beat expectations this time around.

Let’s delve into the factors that might have influenced Marathon Oil’s performance in the September quarter.

Factors to Consider This Quarter

Strong operational performance at Marathon Oil’s US resource basin division, which is responsible for more than three-fourths of the total production, is likely to have contributed to its third-quarter bottom line. In the previous three-month period, the company’s output of oil and natural gas increased 10.7% compared with last year’s corresponding period to 330,000 barrels of oil equivalent per day (Boe/d), a trend that most likely continued in the third quarter because of focused capital spending. Consequently, the Zacks Consensus Estimate for third-quarter net sales volume from the United States is pegged at 337 Boe/d, indicating an increase of 10.9% from the year-ago reported figure.

Importantly, the volume growth is likely to have been achieved on lower costs. During the second quarter, Marathon Oil’s U.S. production costs were down 14% from the year-ago quarter to $4.89 per Boe. Continued progress on the cost front – primarily on account of portfolio optimization efforts – is likely to have lent support to the company’s bottom line in the to-be-reported quarter even in a low oil price environment.

Why a Likely Positive Surprise?

Our proven model predicts 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 an earnings beat.

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

Marathon Oil has an Earnings ESP of +4.17% and a Zacks Rank #3.

Highlights of Q2 Earnings & Surprise History

In the last reported quarter, the Houston, TX-based company beat the consensus mark on Higher-than-expected net sales volumes. Marathon Oil reported adjusted earnings per share of 23 cents that surpassed the Zacks Consensus Estimate by 12 cents.

As far as earnings surprises are concerned, the leading North American upstream operator is on an excellent footing, having gone past the Zacks Consensus Estimate in each of the last four reports. 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

Other Stocks to Consider

Marathon Oil is not the only energy company looking up this earnings season. Here are some other firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this season:

Canadian Natural Resources Limited CNQ has an Earnings ESP of +7.42% and is Zacks #3 Ranked. The company is scheduled to release earnings on Nov 7.

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

Pioneer Natural Resources Company PXD has an Earnings ESP of +1.98% and a Zacks Rank #3. The company is scheduled to release earnings on Nov 4.

Cimarex Energy Co. XEC has an Earnings ESP of +1.32% and is Zacks #3 Ranked. The company is scheduled to release earnings on Nov 4.

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Canadian Natural Resources Limited (CNQ) : Free Stock Analysis Report
 
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