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What's in the Cards for Marathon Oil (MRO) in Q4 Earnings?

Leading upstream energy firm Marathon Oil Corp.MRO is set to release fourth-quarter 2016 results after the closing bell on Feb 15.

In the preceding three-month period, the Houston, TX-based company delivered a positive earnings surprise of 42.11%. The better-than-expected results were driven by the company's efficient cost-control initiatives.

As far as the company's earnings surprise history is concerned, it has an excellent record. Marathon Oil beat estimates in each of the last four quarters with an average positive surprise of 14.70%.

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

Factors to Consider This Quarter

Marathon Oil is a leading energy firm with a large and geographically diverse reserve base and solid project pipeline. Additionally, its healthy balance sheet helps it to capitalize on investment opportunities. We expect such factors to have a positive impact on the upcoming earnings.

Marathon Oil's strong inventory of development projects (in liquid rich resource plays and other focus areas such as Equatorial Guinea) should facilitate production growth over the coming years.

Marathon Oil Corporation Price and EPS Surprise

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

Marathon Oil's strategic initiatives such as cost reduction, exercise of capital discipline, efficiency gains and consistent execution of projects have had a positive impact on the company's financials. In fact, such efforts by the company resulted in its narrower-than-expected third-quarter loss. The improving trend is likely to continue in the fourth quarter as well.

However, similar to other independent exploration and production companies, the results of Marathon are directly exposed to oil and gas prices. Continued weakness in commodity prices has significantly affected the company's revenues, earnings and cash flows.

Earnings Whispers

Our proven model does not conclusively show that Marathon Oil will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat the consensus mark. 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 -7.69%. This is because the Most Accurate estimate is a loss of 14 cents and the Zacks Consensus Estimate stands at a loss of 13 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter .

Zacks Rank: Marathon Oil has a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, the company's negative ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Ranks #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

While earnings beat looks uncertain for Marathon Oil, here are some domestic upstream you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:

W&T Offshore, Inc. WTI is expected to release fourth-quarter earnings results on Mar 14. The company has an Earnings ESP of +73.91% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Sprague Resources LP SRLP has an Earnings ESP of +3.64% and a Zacks Rank #2. The partnership is anticipated to release fourth-quarter earnings on Mar 9.

Pioneer Natural Resources Company PXD has an Earnings ESP of +10.00% and a Zacks Rank #2. The company is likely to release fourth-quarter earnings on Feb 7.

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Pioneer Natural Resources Company (PXD): Free Stock Analysis Report

W&T Offshore, Inc. (WTI): Free Stock Analysis Report

Marathon Oil Corporation (MRO): Free Stock Analysis Report

Sprague Resources LP (SRLP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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