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Marathon Oil (MRO) to Post Q1 Earnings: What's in Store?

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·5 min read
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Marathon Oil Corporation MRO is scheduled to release first-quarter 2021 results on Wednesday May 5, after the closing bell.

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is 14 cents per share and for revenues is $1.11 billion.

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

Factors at Play

Prompted by the uncertainty caused by Winter Storm Uri, Marathon Oil recently released a preliminary update on its first-quarter 2021 production and financial operations.

The company’s first-quarter 2021 production of oil and natural gas averaged at 345,000 barrels of oil equivalent per day (Boe/d), indicating a decline from the sequential quarter’s reported figure of 352,000 Boe/d. Meanwhile, oil output of 172,000 barrels per day is expected to be in line with the prior-quarter reported figure.

However, this energy player’s top line is likely to have benefited from the average realized unhedged crude oil price of $55 in the first quarter, indicating an increase from the sequential quarter's reported figure of $39.71. The preliminary result for natural gas liquids was $24 while that of natural gas was $6.30 per thousand cubic feet, both implying an improvement from the sequential quarter’s reported figures of $16.30 and $2.31 per thousand cubic feet, respectively.

Per preliminary reports, the company’s first-quarter general and administrative expenditure outlook is projected at $90 million comprising severance expense of $11 million and corporate aircraft lease termination expense of $13 million, all attributed to cost-cutting actions in the March quarter of 2021.

Marathon Oil's cash flow from operations is expected in the $610-$630 million range with negative working capital adjustments of $10-$20 million. In the meantime, cash additions to land, plant and facilities are anticipated to total about $200 million. Further, a $71-million realized derivative loss is estimated for the quarter to be reported.

Highlights of Q4 Earnings & Surprise History

Marathon Oil reported fourth-quarter 2020 adjusted net loss per share of 12 cents, narrower than the Zacks Consensus Estimate of a loss of 20 cents. The company’s bottom line was favorably impacted by a tight leash on costs and better-than-expected contribution from both segments. Precisely, the U.S. E&P and the International E&P reported a loss of $33 million and a profit of $29 million each, beating the respective Zacks Consensus Estimate of a loss of $119 million and earnings of $8.4 million.

However, the fourth-quarter adjusted loss compared unfavorably with the year-earlier quarter's earnings of 7 cents due to lower liquids prices and production.

Marathon Oil reported revenues of $830 million that missed the Zacks Consensus Estimate of $844 million and also fell 31.7% year over.

As far as earnings surprises are concerned, this Houston, TX-based Marathon Oil displays a mixed record. Its bottom line surpassed the Zacks Consensus Estimate in two of the trailing four quarters, met the same on one occasion and missed the mark in the remaining quarter, the average surprise being 5.04%. 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 and EPS Surprise

Marathon Oil Corporation price-eps-surprise | Marathon Oil Corporation Quote

What Does Our Model Say?

Our proven 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 chances of beating estimates. But that’s not the case here. 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%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at a loss of 14 cents per share each.

Zacks Rank: Marathon Oil currently carries a Zacks Rank #3,which increases the predictive power of ESP. However, the company’s 0.00% ESP in the combination makes surprise prediction difficult for the stock this reporting cycle. You can see the complete list of today’s Zacks #1 Rank stocks here.

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 perfect combination of ingredients to deliver a beat this reporting cycle:

Viper Energy Partners LP VNOM has an Earnings ESP of +40.00% and is presently Zacks #1 Ranked. The firm is scheduled to release earnings on May 3.

Transocean Ltd. RIG has an Earnings ESP of +7.41% and a Zacks Rank of 3, currently. The firm is scheduled to release earnings on May 3.

NuStar Energy L.P. NS has an Earnings ESP of +19.72% and is Zacks #3 Ranked, presently. The firm is scheduled to release earnings on May 4.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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Transocean Ltd. (RIG) : Free Stock Analysis Report

Marathon Oil Corporation (MRO) : Free Stock Analysis Report

NuStar Energy L.P. (NS) : Free Stock Analysis Report

Viper Energy Partners LP (VNOM) : Free Stock Analysis Report

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