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Marathon Oil (MRO) to Post Q2 Earnings: What's in Store?

Zacks Equity Research
·4 mins read

Marathon Oil Corporation MRO is scheduled to release second-quarter 2020 results on Wednesday Aug 5, after the closing bell.

The Zacks Consensus Estimate for the to-be-reported quarter’s loss is 62 cents per share and for revenues is $530.54 million.

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

Factors at Play

Marathon Oil’scost-reduction efforts have been encouraging enough. In March, the company cut its 2020 capital investment by at least $500 million to $1.9 billion from the earlier provided capex outlook of $2.4 billion, indicating a 30% decrease from the reported capex figure of 2019.  Again in April, management announced plans to curb capital spending to $1.3 billion by trimming an additional $600 million from the past guided range issued in March. It further implies a reduction of $1.1 billion from the original guidance. This updated capital budget projection implies to account for only 50% of the company’s total capital investment reported in 2019. All these strategic moves are expected to have driven the company’s second-quarter earnings and cash flows higher.

However, in the first quarter, Marathon Oil’s International E&P unit and U.S. E&P unit incurred a loss due to decreased average price realizations of crude oil and condensate from both the International and North American E&P segments. This downtrend is likely to have continued in the second quarter too. The Zacks Consensus Estimate for second-quarter average price realizations of crude oil and condensate from the International E&P segment is pegged at $20.22 per barrel, suggesting a decline of 65.14% from $58 reported in the year-ago period. Similarly, the consensus mark for second-quarter average price realizations of crude oil and condensate from the North American E&P segment stands at $23.08 per barrel, implying a 60.9% fall from $59 reported a year earlier.

What Does Our Model Say?

Our proven Zacks model predicts an earnings beat for Marathon Oil this time around. 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.

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 +1.05%.

Zacks Rank: Marathon Oil carries a Zacks Rank #3, which increases the predictive power of ESP.

Highlights of Q1 Earnings & Surprise History

Marathon Oil reported first-quarter 2020 adjusted net loss per share of 16 cents, wider than the Zacks Consensus Estimate of a loss of 13 cents. However, a year ago, the company earned 31 cents per share. Its bottom line was unfavorably impacted by the commodity price crash triggered by the coronavirus-induced demand slump amid a supply glut.

Meanwhile, Marathon Oil reported revenues of $1.2 billion that beat the Zacks Consensus Estimate of $1 billion and also rose 2.8% year over year on strong sales volumes.

As far as earnings surprises are concerned, this Houston, Texas-based Marathon Oil shows a decent record. Its bottom line surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed the mark on the other two occasions, the average beat being 80.88%. 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

Other Stocks to Consider

Here are some other firms worth considering from the energy space on the basis of our model, which shows that these too have the right combination of elements to beat on earnings this season:

Diamondback Energy, Inc. FANG has an Earnings ESP of +6.69% and is Zacks #3 Ranked, presently. The firm is scheduled to release earnings on Aug 3.

USA Compression Partners, LP USAC has an Earnings ESP of +25.00% and a Zacks Rank of 1 at present. The firm is scheduled to release earnings on Aug 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Williams Companies, Inc. WMB currently has an Earnings ESP of +5.44% and a Zacks Rank of 3. The firm is scheduled to release earnings on Aug 3.

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