Will Murphy Oil (MUR) Miss Earnings Estimates in Q3? - Analyst Blog

Murphy Oil Corporation (MUR) is slated to report third-quarter 2014 results on Oct 29. Last quarter, the company posted a negative earnings surprise of 20.35%. On an average, Murphy Oil has posted a 23.53% negative surprise in the last four quarters. Let's see how things are turning out for the third quarter.

Factors to Consider This Quarter

During the second-quarter 2014 earnings call, Murphy Oil stated that its future results will likely be impacted negatively from the slower-than-anticipated recovery of the unplanned maintenance downtime at Syncrude Canada, an unplanned short-term outage at the Kikeh production facility in Malaysia and adjustments for additional risking of production through third-party controlled facilities. These factors have forced the company to reduce its 2014 total production guidance.

In addition, Murphy Oil is currently is in the middle of an organizational restructuring phase, which includes the divestment of a portion of its Malaysian assets and is progressing with the sale of its U.K. refining and marketing businesses. Through these initiatives, it intends to focus on an active exploration and production program. Uncertain outcomes of drilling activities are our primary causes of concern.

As Murphy Oil's performance primarily depends on the movement of commodity prices, the prevailing downward trend of oil prices will likely dent future results of the company.

Earnings Whispers?

Our proven model does not conclusively show that Murphy Oil will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. That is not the case here as you will see below.

Negative Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -1.84%. This is because the Most Accurate Estimate is at $1.07 per share while the Zacks Consensus Estimate is at $1.09 per share.

Zacks Rank #5 (Strong Sell): Murphy Oil's Zacks Rank #5, which when combined with a negative ESP, makes a surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some stocks in the same industry you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:

Cobalt International Energy, Inc. (CIE) has an earnings ESP of +11.11% and a Zacks Rank #1.

WPX Energy, Inc. (WPX) has an earnings ESP of +100.00% and a Zacks Rank #2.

Carrizo Oil & Gas Inc. (CRZO) has an earnings ESP of +10.00% and a Zacks Rank #3.