On 31 March 2019, Marathon Oil Corporation (NYSE:MRO) announced its latest earnings update. Overall, analyst consensus outlook appear bearish, with profits predicted to drop by 13% next year. However, this pessimism is not unsubstantiated given the 5-year track record of negative growth. With trailing-twelve-month net income at current levels of US$1.1b, the consensus growth rate suggests that earnings will decline to US$957m by 2020. Below is a brief commentary on the longer term outlook the market has for Marathon Oil. For those interested in more of an analysis of the company, you can research its fundamentals here.
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What can we expect from Marathon Oil in the longer term?
The view from 15 analysts over the next three years is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To understand the overall trajectory of MRO's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
This results in an annual growth rate of 10% based on the most recent earnings level of US$1.1b to the final forecast of US$1.1b by 2022. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of $0.88 in the final year of forecast compared to the current $1.3 EPS today. However, the near term margins may change heading into 2022, from the current levels of 19% to 16%.
Future outlook is only one aspect when you're building an investment case for a stock. For Marathon Oil, I've put together three essential factors you should further examine:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Marathon Oil worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Marathon Oil is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Marathon Oil? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.