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Will This Price Target Cut Hurt Marathon Oil (MRO) Stock Today?

Stocks in this article: MRO

Story updated at 9:55 a.m. to reflect market activity.

NEW YORK (TheStreet) -- Barclays  (BCS) lowered its price target for Marathon Oil (MRO) to $51 from $55 Thursday, reiterating its "overweight" rating.

Marathon Oil fell -1.4% to $38.37 in morning trading.

The analyst firm also lowered its EPS estimates for the company through 2015. The lower price target and estimates reflect assumptions for liquids pricing in Africa according to Barclays analyst Thomas R. Driscoll.

"We are increasing our differential forecast for Africa liquids pricing relative to Brent to better reflect the production mix now that we have set Libyan volumes to zero," Driscoll wrote. "We are increasing our 2015E differential to ~$48. Our 2015E PICF estimate decreases 4% as the revised differential assumption more than offsets gains tied to our increased volumes forecast for next year."

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Separately, TheStreet Ratings team rates MARATHON OIL CORP as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate MARATHON OIL CORP (MRO) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, expanding profit margins and increase in stock price during the past year. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Oil, Gas & Consumable Fuels industry average. The net income increased by 26.8% when compared to the same quarter one year prior, rising from $426.00 million to $540.00 million.
  • The gross profit margin for MARATHON OIL CORP is rather high; currently it is at 52.01%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, MRO's net profit margin of 18.69% significantly outperformed against the industry.
  • MRO, with its decline in revenue, underperformed when compared the industry average of 1.3%. Since the same quarter one year prior, revenues fell by 26.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • MARATHON OIL CORP's earnings per share declined by 11.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, MARATHON OIL CORP reported lower earnings of $2.25 versus $2.27 in the prior year. This year, the market expects an improvement in earnings ($3.14 versus $2.25).
  • In its most recent trading session, MRO has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: MRO Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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