Valued at a market cap of around $16 billion, Texas-based Marathon Oil Corporation (MRO) stands as a dynamic player in the energy sector, leveraging its expertise in four premier U.S. resource plays: Eagle Ford, Bakken, Permian, and Oklahoma’s STACK and SCOOP formations. Complementing its domestic strength is a world-class integrated gas business in Equatorial Guinea.
Shares of this energy giant are up roughly 12.5% over the past year and 18.3% on a YTD basis, underperforming the broader S&P 500 Index’s ($SPX) 30.4% annual return and 23.1% YTD gains.
However, narrowing the focus, MRO stock’s performance appears to have outshined the Energy Select Sector SPDR Fund’s (XLE) 12% return over the past 52 weeks and 13% gain on a YTD basis.
Despite the stock’s underperformance, Marathon Oil took a major step forward in its transformative merger with ConocoPhillips (COP), first announced earlier this year in May. The deal, expected to close by late Q4 of fiscal 2024, gained momentum on Aug. 29, when Marathon secured necessary shareholder approval, sending its shares up more than 2% on the very same day. This milestone sets the stage for a game-changing collaboration in the energy sector.
For the current fiscal year, ending in December, analysts expect MRO’s bottom line to drop 9.6% annually to $2.36 per share. The company’s earnings surprise history is mixed. It beat the consensus estimates in three of the last four quarters while missing on one other occasion.
Overall, Wall Street appears cautiously optimistic about Marathon Oil’s stock, with a consensus “Moderate Buy” rating. Of the 19 analysts offering recommendations, eight advise a “Strong Buy,” one gives a “Moderate Buy,” and the remaining ten suggest “Hold.”
The above configuration has remained steady over the past three months.
On Oct. 2, RBC trimmed its price target for Marathon Oil to $34 from $36 while reaffirming its “Outperform” rating on the stock.
The mean price target of $31.05 indicates an 8.6% potential upside from the current price levels, while the Street-high price target of $37 suggests that MRO could rally as much as 29.4% from here.
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