Marathon Oil Corporation MRO stock looks compelling at the moment. We are positive about the company’s prospects and believe that it is the right time for you to add the stock to your portfolio as it is poised to carry the momentum ahead.
Marathon Oil’s strategic portfolio in key resource-shale plays like Bakken, Eagle Ford, Permian and STACK/SCOOP signals visible production growth in the upcoming years. Also, the company’s diversified profile makes it less exposed to the pipeline constraints in the Permian Basin. With the output from Permian accounting for just 8% of the firm’s total volumes, it largely remains unaffected by infrastructural bottlenecks and differential issues of the region. With enhanced completion designs and effective spacing strategies, the company has been improving the quality of its assets and is well-positioned to ramp up production and revenues. For 2019, the company anticipates total output to increase 10% from its year-ago level, targeting 12% growth in the United States.
Notably, over the past few years, the Texas-based energy explorer inked several deals to sell its non-core assets like Canadian oil sands acreage and Libyan holdings among others that do not fit into the company’s long-term growth plans. These strategic sell-offs not only bolstered its portfolio but boosted its financials as well.
Marathon Oil’s balance sheet seems quite strong with adequate liquidity and a manageable leverage of around 31%, which increases its financial flexibility and also helps it tap profitable growth opportunities. Importantly, the company generated an organic free cash flow of $80 million during the first quarter.The company’s cumulative two-year free cash flows for 2019 and 2020 are anticipated to be around $750 million at oil price of $50 a barrel and $2.2 billion at crude price of $60 a barrel.
Considering the above factors, it should not come as a surprise that Marathon Oil carries a Zacks Rank #2 (Buy) along with a favorable VGM Score of B. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities for investors. You can see the complete list of today’s Zacks #1 Rank stocks here.
Investors should note that the company displays a decent earnings history, having surpassed estimates in each of the last three quarters. What’s more encouraging is the solid estimate revision that the company is witnessing of late. In the past 30 days, earnings estimate of the firm have moved 18 cents north to currently stand at 82 cents a share.
As such, Marathon Oil appears to be a solid bet based on strong fundamentals, an impressive portfolio/production profile and robust financials. Hence, if you haven’t taken advantage of the share price appreciation yet, it’s time you add the stock to your portfolio.
Other Stocks Worth a Watch
Investors interested in the energy space can also consider some other top-ranked stocks like ConocoPhillips COP, Cactus, Inc. WHD and Hess Corporation HES, each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
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