Marathon Oil Continues To Gain Fans

| About: Marathon Oil (MRO)

Marathon Oil (NYSE:MRO) has had a nice little run since I purchased it and highlighted the shares in early November. The shares have run from $30 to over $35 a share over those three months. I continue to hold the shares as the company continues to pick up positive catalysts and still sports reasonable valuations.

Recent positives for MRO:

  • Oppenheimer raised its price target to $45 from $40. It is the second time this year the analyst firm has raised its price target on Marathon. Oppenheimer cited a couple of reasons for this positive action:
  1. It expects the company to have $900mm in operating cash flow this year, increasing to $1.5B in FY2014.
  2. It also expects "Divestiture proceeds could double these amounts and provide MRO with additional financial flexibility to boost shareholder value."
  • Credit Suisse raised its price target to $43 from $40 a share on February 10th. It maintains its "outperform" rating on the shares.

Marathon Oil Corporation is an energy concern that operates in three segments: Exploration and Production, Oil Sands Mining, and Integrated Gas.

  • T Boone Pickens recently added a new position in Marathon, and TheStreet recently reiterated its buy recommendation on the stock.
  • 80% of the company's production is oil & liquids, and the company's guidance is for a solid 5% to 7% annual production increases going forward.
  • The stock yields a decent 2%. If cash flow picks up as Oppenheimer predicts, I would look for significant increases to the dividend payout in the next few years.
  • MRO sells for a reasonable 11x 2014's consensus earnings given its production growth and dividend yield. Although the company's market capitalization ($25B) would ordinarily prohibit it, MRO's prime acreage in the Bakken and Eagle Ford could make it an acquisition target. M&A activity is at the highest level since 2007, and both Dell (NASDAQ:DELL) and Heinz (HNZ) have similar market capitalizations.

Disclosure: I am long MRO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.