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Marathon Oil (MRO) to Post Q3 Earnings: What's in Store?

Marathon Oil Corporation MRO is scheduled to release third-quarter 2020 results on Wednesday Nov 4, after the closing bell.

The Zacks Consensus Estimate for the to-be-reported quarter’s loss is 28 cents per share and for revenues is $752.27 million.

Against this backdrop, let’s delve into the factors that might have impacted the company’s performance in the September 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, reflecting 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 guidance issued in March. It further implies a reduction of $1.1 billion from the original projection. This updated capital budget estimate accounts 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 third-quarter earnings and cash flows higher.

However, in the second quarter, Marathon Oil’s International E&P as well as U.S. E&P units 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 third quarter too. The Zacks Consensus Estimate for third-quarter average price realizations of crude oil and condensate from the International E&P segment is pegged at $31.67 per barrel, suggesting a decline of 31.2% from $46.04 reported in the year-ago period. Similarly, the consensus mark for third-quarter average price realizations of crude oil and condensate from the North American E&P segment stands at $37.43 per barrel, implying a 31.95% fall from $55 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 +1.50%.

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

You can see the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q2 Earnings & Surprise History

Marathon Oil Corporation reported second-quarter 2020 adjusted net loss per share of 60 cents, narrower than the Zacks Consensus Estimate of a loss of 62 cents, attributable to lower year-over-year U.S. production costs. Meanwhile, a year ago, the company earned 23 cents per share. This time, its bottom line was unfavorably impacted by the commodity price crash, triggered by the coronavirus-induced demand slump amid a supply glut.

Marathon Oil’s revenues of $272 million missed the Zacks Consensus Estimate of $531 million and also fell from the year-ago figure of $1.43 billion.

As far as earnings surprises are concerned, this Houston, TX-based Marathon Oil displays a decent record. Its bottom line surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed the mark on the remaining two occasions, the average beat being 54.41%. This is depicted in the graph below:

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:

NuStar Energy L.P. NS has an Earnings ESP of +2.94% and a Zacks Rank #2, presently. The firm is scheduled to release earnings on Nov 5.

Targa Resources, Inc. TRGP has an Earnings ESP of +33.33% and a Zacks Rank of 3, currently. The company is scheduled to release earnings on Nov 5.

Cheniere Energy, Inc. LNG has an Earnings ESP of +31.36% and is Zacks #3 Ranked at present. The company is scheduled to release earnings on Nov 6.

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Marathon Oil Corporation (MRO): Free Stock Analysis Report
NuStar Energy L.P. (NS): Free Stock Analysis Report
Cheniere Energy, Inc. (LNG): Free Stock Analysis Report
Targa Resources, Inc. (TRGP): Free Stock Analysis Report
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