NEW YORK (TheStreet) -- Shares of Marathon Oil (MRO) - Get Report are decreasing 5.37% to $14.90 in midday trading on Monday, as oil prices decline on the global supply glut and weakened economic outlook.
The global oversupply of oil remains above 1 million barrels per day, as sustained output from some major producers outweighs recent declines in U.S. crude production, the Wall Street Journal reports.
Exacerbating the supply glut, the financial slowdown in China, the world's second-largest oil consumer, is fueling concerns that global demand of oil will fall short of supply.
Additionally, Citigroup cut its forecast for 2016 global growth to 2.9% from 3.1%and the International Monetary Fund is expected to lower its global economic growth forecast later today as well, according to the Journal. Oil prices have tended to mirror the movements of wider markets.
Crude oil (WTI) is falling 2.80% to $44.42 per barrel this afternoon, and Brent crude is down 2.49% to $47.39 per barrel, according to the CNBC.com index.
Separately, TheStreet Ratings team rates MARATHON OIL CORP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
We rate MARATHON OIL CORP (MRO) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 171.5% when compared to the same quarter one year ago, falling from $540.00 million to -$386.00 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MARATHON OIL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $408.00 million or 62.50% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 60.07%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 207.54% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- MARATHON OIL CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MARATHON OIL CORP increased its bottom line by earning $1.41 versus $1.32 in the prior year. For the next year, the market is expecting a contraction of 198.6% in earnings (-$1.39 versus $1.41).
- You can view the full analysis from the report here: MRO