Marathon's (MRO) Q3 Earnings Preview: Key Things to Consider
Marathon Oil Corporation MRO is set to release third-quarter results on Nov 1. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of 69 cents per share on revenues of $1.8 billion.
Let’s delve into the factors that might have influenced the independent oil and gas producer’s performance in the September quarter. But it’s worth taking a look at MRO’s previous-quarter results first.
Highlights of Q2 Earnings & Surprise History
In the last reported quarter, the Houston, TX-based upstream player beat the consensus mark on strong domestic oil and gas production. MRO had reported adjusted earnings per share of 48 cents, beating the Zacks Consensus Estimate of 43 cents. Revenues of $1.5 billion generated by the firm also came in 0.4% above the Zacks Consensus Estimate.
Marathon Oil beat the Zacks Consensus Estimate for earnings in each of the last four quarters, resulting in an earnings surprise of 10.8%, on average. This is depicted in the graph below:
Marathon Oil Corporation Price and EPS Surprise
Marathon Oil Corporation price-eps-surprise | Marathon Oil Corporation Quote
Trend in Estimate Revision
The Zacks Consensus Estimate for the third-quarter bottom line has been revised 1.5% upward in the past seven days. The estimated figure indicates a 44.4% drop year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 21.9% decrease from the year-ago period.
Factors to Consider
Marathon Oil is expected to have benefited from higher output during the quarter. Considering MRO’s impressive production profile from its high-margin U.S. resource plays (Eagle Ford, Bakken, Oklahoma and Permian), our expectation for the company’s third-quarter volume is pegged at some 352,000 barrels of oil equivalent per day (BOE/d), 19.3% up from the year-ago quarter’s level of 205,000 BOE/d.
However, lower oil and natural gas realizations are likely to have hurt Marathon Oil’s revenues and cash flows. Going by our model, MRO’s third-quarter key U.S. E&P segment’s realized average liquids price (crude oil and condensate) is pegged at $79.56 per barrel — down from the year-earlier level of $93.67. Additionally, our projection for the average realized natural gas prices reflects a 68.8% year-over-year drop.
On a further bearish note, the increase in Marathon Oil’s costs might have dented its to-be-reported bottom line. In particular, our estimate for production cost is pegged at $196.4 million, indicating a 1.7% increase from $193 million reported in the year-ago quarter. Our model also predicts the company’s total expenses to edge up 0.4% year over year to $1.1 billion. The upward cost trajectory could be attributed to the ongoing inflationary environment and a tight labor market.
What Does Our Model Say?
The proven Zacks model does not conclusively show that Marathon Oil is likely to beat estimates in the third quarter. 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 69 cents per share each.
Zacks Rank: MRO currently carries a Zacks Rank #2, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult this earnings season.
Stocks to Consider
While an earnings beat looks uncertain for Marathon Oil, here are some firms from the energy space that you may want to consider on the basis of our model:
Diamondback Energy FANG has an Earnings ESP of +0.84% and a Zacks Rank #3. The firm is scheduled to release earnings on Nov 6.
Over the past 90 days, Diamondback Energy saw the Zacks Consensus Estimate for 2023 move up 6.4%. Valued at around $28.6 billion, FANG has gained 1.9% in a year.
Civitas Resources CIVI has an Earnings ESP of +7.46% and a Zacks Rank #2. The firm is scheduled to release earnings on Nov 7.
Civitas Resources beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of 2.7%, on average. Valued at around $7 billion, CIVI has gained 7.4% in a year.
Delek US Holdings DK has an Earnings ESP of +5.26% and a Zacks Rank #2. The firm is scheduled to release earnings on Nov 7.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the past 90 days, Delek US Holdings saw the Zacks Consensus Estimate for 2023 move up 26.5%. Valued at around $1.6 billion, DK has lost 14.7% in a year.
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Marathon Oil Corporation (MRO) : Free Stock Analysis Report
Delek US Holdings, Inc. (DK) : Free Stock Analysis Report
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Civitas Resources, Inc. (CIVI) : Free Stock Analysis Report
