Marathon Oil Corporation MRO is set to release first-quarter 2015 financial results after the closing bell on May 6.
The oil and natural gas exploration and production (E&P) firm failed to meet the Zacks Consensus Estimate in three of the trailing four quarters and delivered an average negative surprise of 132.26%. Let’s see how things are shaping up for this announcement.
Factors to Consider this Quarter
Marathon Oil expects production from its North America E&P unit – the largest earnings generating segment – of around 268,000 to 279,000 barrels of oil equivalent per day (BOE/d). This is higher than both the sequential and the year-ago quarter output.
However, upstream firms like Marathon Oil are likely to have been hit hard by the slump in crude prices during the January-March quarter. Price Realization is an important component of margin for such E&P firms. Moreover, the absence of a downstream segment – as Marathon Oil spun off its refining business in 2011 with the formation of Marathon Petroleum Corp. MPC – not only reduces its asset diversification but also increases its risk profile, especially in this weak pricing scenario.
Earnings Whispers?
Our proven model does not conclusively show that Marathon Oil is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below:
Zacks ESP: Marathon Oil currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 44 cents per share.
Zacks Rank: Marathon Oil carries a Zacks Rank #3 (Hold). While this is favors our prediction, a 0.00% ESP leaves our forecast inconclusive
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies for investors to consider, that, according to our model have the right combination of elements to post an earnings beat this quarter:
Alon USA Energy, Inc. ALJ has an Earnings ESP of +10.71% and holds a Zacks Rank #1 (Strong Buy). The company is expected to release earnings on May 7.
Callon Petroleum Company CPE has an Earnings ESP of +50.00% and holds a Zacks Rank #2 (Buy). The company is expected to release earnings on May 6.
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