Marathon Oil Corporation (Ticker Symbol: MRO) reported earnings late this week that were better than analysts expected. The Houston, Texas based oil company reported an earnings per share beat of .23 cents per share vs. Wall Street analysts’ estimates of .011 cents per share. Additionally, Marathon Oil reported revenue of $1.43 billion vs. Wall Street analysts’ expectations of $1.35 billion. This marks the fourth quarter in a row that Marathon Oil has beaten Wall Street analysts’ revenue estimates.
Above is a two and a half year chart of Marathon Oil’s stock. The stock started off in 2018 under pressure right out of the gate in the first quarter of 2017. The stock continued to sell off until finding support just above the $10.00 price level in the third quarter of 201. In that same quarter, Marathon Oil bottomed, forming a bullish divergence pattern, where the stock makes a lower low in price but the Relative Strength Index makes a higher low, as indicated on the chart by the red lines. Traders and investors sometimes look at divergences for a possible pause within the current trend which can, at times, lead to a reversal, as occurred in Marathon Oil’s case.
Marathon Oil’s stock proceeded to break above its 2017 downtrend and continued to rally over 100% before finding some price resistance around the $24.00 level. The stock put in a V-shaped reversal and began to sell off after having a poor earnings and guidance report in the fourth quarter of 2018. The news sent the stock breaking below its uptrend and trading below both its 100 and 200 day Moving Averages. Marathon Oil continued to sell off over 40% before finding some support around the $12.00 price level at the end of 2018. The stock took off to a positive start in 2019, trading in a rising wedge formation. A rising wedge formation is a pattern marked by a series of higher tops and higher bottoms and are usually considered bearish. The stock broke out to the downside out of that pattern and is currently trading negative on the year.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 4 analysts offering 12-month price targets, the average price target for Marathon Oil’s stock is $18.29. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $12.76.
Marathon Oil has greatly underperformed the S&P 500 this year and is down over 10% year-to-date. The company has benefited from the strength in crude oil that has had a strong start to the year so far and is currently sitting up 16% for the year. Investors in the company should look to their next earnings release on November 8th for fresh news within the company.