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Marathon Oil (NYSE:MRO) is scheduled to announce its 1st quarter 2013 earnings on Tuesday, May 7th. Below I have provided an update of the quarter as well as an overview of earnings expectations.

Profile and Estimates

Marathon Oil has a market cap of $23.74 billion and currently trades for $33.53 per share. Shares are up 13.66% YTD and trade 47.13% above their 52-week low of $22.79. Analysts have a mean target price of $40.63 and a median price target of $40.00 on the shares. Twenty two analysts have an average first quarter earnings per share estimate of $0.72 on estimated revenues of $4.25 billion. Marathon Oil has only beat earnings expectations in one of last four quarters.

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Fundamentals and Highlights (Sources cited below article)

Positives

  • 2.00% dividend yield.
  • P/B of 1.3 which is below the industry averages ratio of 1.5.
  • Operating margins of 39.0% and net margins of 9.8% are both above the industry averages 14.4% and 8.1% respectively.
  • Slowly acquiring land in highly profitable areas like Eagle Ford and Bakken, currently owns over a quarter of a million acres in Eagle Ford and over 400,000 acres in the Bakken.

Negatives

  • P/E of 15.0 and P/S of 1.5 are both above the industry averages 10.7 and 0.6 respectively.
  • ROA of 4.8 and ROE of 8.9 are both below the industry averages 8.9 and 19.2 respectively.
  • Late entry into Bakken and Eagle Ford came at a lofty price.
  • High tax rate. Was 74.12% last year which was much higher than competitors Anadarko (31.42%), EOG (55.47%) and Apache (58.97%).

Take Away

It's hard to get past that extremely high tax rate but Marathon is targeting more profitable areas and has debt under control. Short interest is down from year-end highs and investors/analysts are expecting a lower EPS than the same time last year, which should make the targeted $0.72 per share relatively easy to achieve. Keep an eye out for the earnings report on Tuesday.

Sources

In addition to the links above, ratios and financial data was sourced from Morningstar.com, which you can find here. Other company data was sourced from the annual report that can be accessed here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

Source: Marathon Oil's First Quarter Earnings Preview

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