Marathon Oil Corporation (MRO - Get Rating) is an independent exploration and production company that engages in the exploration and production of crude oil and condensate, natural gas liquid (NGL), and natural gas.

Capital One Financial investment analysts recently boosted MRO’s EPS estimate for the third quarter. Analyst P. Johnston now forecasts that the company will post an EPS of $1.03 for the quarter, up from the prior forecast of $1.01.

Over the past year, MRO’s stock has gained 83.6% and 31.4% year-to-date to close its last trading session at $21.57. It has gained 4.4% over the past five days and 3.5% intraday. Moreover, the 12-month median price target of $34.07 indicates a 58% potential upside. The price targets range from a low of $24.00 to a high of $42.00.

In addition, out of the 15 Wall Street analysts rating the stock, ten have rated it Buy, four have rated it Hold, and one has rated it Sell.

Here are the factors that could affect MRO’s performance in the near term:

Solid Financials

For the fiscal first quarter that ended March 31, MRO’s total revenues and other income increased 63.7% year-over-year to $1.75 billion. Income from operations rose 588% from the prior-year quarter to $805 million. Adjusted net income and adjusted net income per share improved 351.2% and 385.7% from the same period the prior year to $749 million and $1.02.

Favorable Growth Expectations

The consensus EPS estimates of $1.28 and $1.33 for the quarter ended June and the quarter ending September 2022 indicate a 481.8% and 241% year-over-year increase. Likewise, the consensus revenue estimates for the same periods of $2.05 billion and $2.14 billion reflect improvements of 79% and 63% from the respective prior-year periods.

Street EPS and revenue estimates for the fiscal year 2022 of $4.88 and $7.81 billion indicate 210.8% and 42.9% year-over-year growth.

Wide Profit Margins

MRO’s trailing-12-month gross profit margin of 78.65% is 100.4% higher than the industry average of 39.24%. Its trailing-12-month net income margin and levered FCF margin of 34.70% and 30.60% are 613.8% and 331.3% higher than their respective industry averages of 4.86% and 7.10%.

The stock’s trailing-12-month ROE, ROTC, and ROA of 19.54%, 6.92%, and 11.97% are 84.2%, 36.5%, and 238.5% higher than their respective industry averages of 10.61%, 5.07%, and 3.54%.

POWR Ratings Reflect Promising Prospects

MRO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

MRO has a Quality grade of A in sync with its wide profitability margins. The stock has a Momentum grade of A, which is justified as the stock is trading above its 200-day Moving Average of $21.33.

The stock has a Value grade of C, which is justified by its forward non-GAAP PEG multiple of 0.20, which is 68.9% lower than the industry average of 0.66. However, in terms of its forward Price/Sales, it is trading at 1.91x, 51.4% higher than the industry average of 1.26x.

In the 97-stock Energy – Oil & Gas industry, it is ranked #26. The industry is rated B.

Click here to see the additional POWR Ratings for MRO (Growth, Stability, and Sentiment).

View all the top stocks in the Energy – Oil & Gas industry here.

Bottom Line

MRO’s impressive bottom-line growth and wide profit margins reflect its solid positioning. Moreover, analysts see a more than 55% upside potential in the stock. Hence, I think the stock might be an ideal buy now.

How Does Marathon Oil Corporation (MRO) Stack Up Against its Peers?

While MRO has an overall POWR Rating of B, one might consider looking at its industry peers, Adams Resources & Energy, Inc. (AE - Get Rating) and Whitecap Resources Inc. (SPGYF - Get Rating), which have an overall A (Strong Buy) rating.

MRO shares were trading at $21.98 per share on Tuesday morning, up $0.41 (+1.90%). Year-to-date, MRO has gained 34.69%, versus a -17.94% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

More Resources for the Stocks in this Article