Tuesday, November 11, 2014

Marathon Oil (MRO) 2014 Review

Marathon Oil is an oil and natural gas production company, having recently spun off its refining operations.  As a recently separated entity, it has limited historical data. However, future profit and dividend increases are expected in the 8-13% range and ROE is estimated in the 10-12% area.  Looking ahead both earnings and dividends will be driven by:

(1) expanding activity in Texas’ Eagle Ford shale,

(2) divesting of underperforming assets,

(3) strong inventory of development projects [Indonesia, Iraq, Poland].

            (4) share repurchases.

Negatives:

(1) potential fluctuations in oil and gas prices,

(2) political risks associated with doing business in foreign countries,

(3) operational problems in Libya.

MRO is rated A by Value Line, has a 24% debt to equity ratio and its stock yields 2.1%.

Statistical Summary

                 Stock      Dividend         Payout      # Increases  
                Yield      Growth Rate     Ratio       Since 2011

MRO         2.1%           14%              27%             3
Ind Ave      1.6             11                  23               NA 

                  Debt/                        EPS Down       Net        Value Line
                  Equity         ROE      Since 2011      Margin       Rating

MRO         24%            10%            1                 16%           A
Ind Ave      43               13             NA                21            NA

       Chart

            Note: MRO stock made good progress off its March 2009 low, surpassing the downtrend off its June 2007 high (straight red line) and the November 2008 trading high (green line).  Long term, the stock is in an uptrend (blue lines).  Intermediate term, it is in an uptrend (purple lines).  The wiggly red line is the 50 day moving average.  The Dividend Growth Portfolio owns a one half position in MRO, having Sold Half in mid-2011.  The upper boundary of its Buy Value Range is $30; the lower boundary of its Sell Half Range is $56.
    


11/14

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