It's been a good week for Marathon Oil Corporation (NYSE:MRO) shareholders, because the company has just released its latest third-quarter results, and the shares gained 8.3% to US$4.29. It was a pretty bad result overall; while revenues were in line with expectations at US$754m, statutory losses exploded to US$0.40 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus, from the 20 analysts covering Marathon Oil, is for revenues of US$3.16b in 2021, which would reflect a chunky 10% reduction in Marathon Oil's sales over the past 12 months. Losses are predicted to fall substantially, shrinking 47% to US$0.75. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$3.15b and losses of US$0.71 per share in 2021. Overall it looks as though the analysts were a bit mixed on the latest consensus updates. Although sales forecasts held steady, the consensus also made a to its losses per share forecasts.
As a result, there was no major change to the consensus price target of US$6.42, with the analysts implicitly confirming that the business looks to be performing in line with expectations, despite higher forecast losses. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Marathon Oil, with the most bullish analyst valuing it at US$13.00 and the most bearish at US$4.00 per share. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Marathon Oil's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 10% revenue decline a notable change from historical growth of 2.2% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 11% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Marathon Oil is expected to lag the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Marathon Oil. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Marathon Oil analysts - going out to 2023, and you can see them free on our platform here.
Even so, be aware that Marathon Oil is showing 3 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...
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