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Will Marathon Oil (MRO) Disappoint Investors in Q2 Earnings?

Energy explorer Marathon Oil Corporation MRO is set to release second-quarter 2017 results after the closing bell on Aug 2.

In the last reported quarter, the Houston, TX-based company delivered a positive earnings surprise of 12.50% on the back of increased price realizations and cost-control initiatives. As far as the company’s earnings surprise history is concerned, it has an impressive record. Marathon Oil beat estimates in the last four quarters with an average positive surprise of 20.47%.

Let’s see how things are shaping up for this announcement.


Marathon Oil Corporation Price and EPS Surprise


Marathon Oil Corporation Price and EPS Surprise | Marathon Oil Corporation Quote

Factors at play

Being an upstream firm, weakness in the commodity prices might lower exploration and production activities. Oil prices have been falling below the psychologically-critical $50 threshold again, erasing all the gains associated with the OPEC-led output cut. The continued rise in domestic production owing to higher shale output has dragged down prices. During the second quarter, the price of oil and natural gas declined by 8.4% and 5%, respectively. This might dent the company's earnings and revenues.

The year-over-year decline in production and uncertainty regarding its low-cost Libyan operations are also causes of concern. Lack of growth opportunities is another threat. This also accounts for our bleak earnings outlook for the company.

Earnings Whispers

Our proven model does not conclusively show that Marathon Oil is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -15.39%. This is because the Most Accurate estimate is pegged at a loss of 15 cents, while the Zacks Consensus Estimate is pegged at a loss of 13 cents.

Zacks Rank: Marathon Oil currently carries a Zacks Rank #4 (Sell). Note that we caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies from the energy sector that, according to our model, have the right combination of elements to post an earnings beat this quarter:

Noble Corporation NE has an Earnings ESP of +3.03% and a Zacks Rank #3. The company is likely to release earnings on Aug 3.You can see the complete list of today’s Zacks #1 Rank stocks here.

Enbridge Inc ENB has an Earnings ESP of +38.24% and a Zacks Rank #3. The company is expected to release earnings on Aug 3.

C&J Energy Services, Inc. CJ has an Earnings ESP of +100.00% and a Zacks Rank #3. The company is expected to release earnings on Aug 8.

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