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Marathon Oil’s Expected 2Q15 Earnings May Disappoint



Quarterly earnings per share

In the last part, we discussed Marathon Oil’s (MRO) revenues versus analysts estimates. In this article, we will discuss its earnings per share (or EPS) versus estimates. In 2Q15, analysts expect MRO to continue to incur a loss. Its 2Q15 adjusted loss per share is expected to be $0.32, a mild improvement over the $0.37 adjusted loss per share in 1Q15.

Marathon Oil maintained strong earnings until 2Q14 and declined in 3Q14. Then, led by the crude oil price fall, its earnings switched to a loss in 4Q14. In 1Q15, its adjusted net loss increased further, more than doubling from the previous quarter. Between 1Q13 and 2Q14, its adjusted EPS had increased 74%.

In comparison, Newfield Exploration Co.’s (NFX) 1Q15 EPS switched to a loss from an EPS of $2.09 in 1Q14. LINN Energy’s (LINE) net loss fell to $1.03 per share from a $0.27 per share loss in 1Q14. MRO comprises 1.1% of the iShares US Energy ETF (IYE) and 0.1% of the SPDR S&P 500 ETF Trust (SPY).

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Adjusted EPS versus estimates

In 1Q15, adjusted EPS fared better than the analysts’ expectations. Its adjusted net loss was $0.37 per share versus analysts’ expectations of a $0.45 loss per share. In 1Q15, the company recorded $27 million (pre-tax) in charges on workforce restructuring.

As noted in the graph above, Marathon Oil’s adjusted EPS fell short of estimates in some of the quarters in the past. But, on an average, adjusted EPS nearly matched the consensus EPS in the past nine quarters.

Weak crude oil prices will continue to take their toll on upstream companies like Marathon Oil in 2Q15. A rise in crude oil prices needs to be sustained for a considerable period to affect earnings meaningfully.

Next, we will discuss Marathon Oil’s revenue growth in its various geographies.


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