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Marathon Oil (MRO) is a Zacks Rank #5 (Strong Sell) as earnings estimates have tracked lower due to softer demand for oil.  Over the last year, the company has posted 4 straight beats of the Zacks Consensus Estimate. This article will look at why this stock is a Zacks Rank #5 (Strong Sell) as it is the Bear of the Day.

Description

Marathon Oil Corp. engages in the exploration, production, and marketing of liquid hydrocarbons and natural gas. It operates through the following two segments: United States (U. S.) and International. The U. S. segment engages in oil and gas exploration, development and production activities in the U.S. The International segment engages in oil and gas development and production across international locations primarily in Equatorial Guinea and the United Kingdom. The company was founded in 1887 and is headquartered in Houston, TX.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

In the case of Marathon Oil, I see four beats of the Zacks Consensus Estimate.  This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.

The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.

Earnings Estimates

The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower.  For MRO I see annual estimates moving lower of late.

The current fiscal year (2023) consensus number moved lower from $2.73 to $2.62 over the last 60 days. 

The next year moved from a gain of $3.83 to $3.14 over the last 60 days.

Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).

It should be noted that a lot of stocks in the Zacks universe are seeing negative earnings estimate revisions.  That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).

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