Skip to main content

Marathon Oil Upgraded on 'Tailwinds for the Energy Sector'

Marathon Oil was upgraded to equal weight at Morgan Stanley, which says rising rates and economic growth are 'tailwinds for the energy sector.'
  • Author:
  • Publish date:

Marathon Oil  (MRO) - Get Free Report analysts at Morgan Stanley upgraded the stock to equal weight from underweight, citing factors including stronger free cash flow and an attractive valuation.

The Houston company should also top consensus estimates in the quarter, the investment firm said. 

"Rising inflation, interest rates, and GDP are all tailwinds for the energy sector, where valuations still remain cheap versus other cyclicals," Morgan Stanley analyst Devin McDermott wrote. 

Additionally, stronger free cash flow and "a rapidly improving balance sheet position the company to boost cash returns over the coming quarters."

Marathon Oil shares at last check were trading off 0.7% at $12.81. The shares touched a 52-week high $14.16 on June 3.

Real Money's Rev Shark Opens Position in Marathon Oil

Last month, Marathon reported a GAAP net loss of $242 million, or 37 cents a share, narrowed from a net loss of $9.2 billion, or $14.25 a share, in the year-earlier period. The adjusted net loss in the latest quarter was 20 cents a share.

Revenue rose 9% to $22.88 billion from $20.99 billion.

A survey of analysts by FactSet produced consensus estimates of a GAAP loss of 71 cents a share, or an adjusted loss of 72 cents a share, on revenue of $19.35 billion.

"With the COVID-19 vaccination rollout, we are beginning to see increases in global mobility and demand for transportation fuels," Chief Executive Michael Hennigan said in a statement. 

"For the first time since the pandemic began our refining and marketing business generated positive adjusted" earnings before interest, taxes, depreciation and amortization.