McDermott International Inc. (MCDIF)

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February 12, 2016 12:00am ET
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Marathon Oil (MRO): What to Expect This Earnings Season?

12:40 pm ET February 15, 2016 (Zacks) Print
Marathon Oil Corporation MRO is set to release fourth-quarter 2015 financial results after the closing bell on Feb 17, 2016.

The oil and natural gas exploration and production (E&P) firm had posted an average negative surprise of 111.64% for the trailing four quarters. Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Marathon Oil is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +4.00%. This is very meaningful and a leading indicator of a likely positive earnings surprise.

Zacks Rank: Marathon Oil carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings. Meanwhile, the Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.

The combination of Marathon Oil’s Zacks Rank #3 and +4.00% ESP makes us confident of an earnings beat.

What is Driving the Better-Than-Expected Earnings?

Houston, TX-based Marathon Oil is a leading energy firm with a large and geographically-diverse reserve base and solid project pipeline. Additionally, it possesses a healthy balance sheet, which helps it to capitalize on investment opportunities. These factors should boost earnings in the to-be-reported quarter.

During the third-quarter earnings announcement, the company declared that for 2015, it expects total year-over-year production growth of 7%, on the higher end of previous guidance range of 5–7%.

The positives might get partially offset by the persistent weakness in crude prices. This is because the results of E&P firms are directly impacted by oil price volatility.

Other Stocks to Consider

Here are some companies from the energy space which, according to our model, have the right combination of elements to post an earnings beat this quarter.

McDermott International Inc. MDR has an Earnings ESP of +7.14% and a Zacks Rank #2. The company is anticipated to release earnings on Feb 22.

Summit Midstream Partners LP SMLP has an Earnings ESP of + 50.00% and a Zacks Rank #2. The partnership is expected to release earnings on Feb 25.

Alon USA Energy Inc. ALJ has an Earnings ESP of +26.67% and a Zacks Rank #3. The company is likely to release earnings on Feb 24.

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MCDERMOTT INTL (MDR): Free Stock Analysis Report

ALON USA ENERGY (ALJ): Free Stock Analysis Report

MARATHON OIL CP (MRO): Free Stock Analysis Report

SUMMIT MIDSTRM (SMLP): Free Stock Analysis Report

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