Why Is Murphy Oil (MUR) Down 11.2% Since Last Earnings Report?

A month has gone by since the last earnings report for Murphy Oil (MUR). Shares have lost about 11.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Murphy Oil due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Murphy Oil Q4 Earnings Beat Estimates, Revenues Miss

Murphy Oil delivered fourth-quarter 2019 adjusted earnings of 16 cents per share, which beat the Zacks Consensus Estimate of 12 cents by 33.3%. Further, the figure significantly improved from the year-ago quarter’s loss of 9 cents.

On a GAAP basis, net loss was 46 cents against an income of 59 cents per share in the prior-year quarter.

For 2019, the company reported adjusted earnings of 87 cents against a loss of 37 cents in 2018.

On a GAAP basis, 2019 net income was $6.98 per share compared with an income of $2.36 in the prior-year quarter.

Revenues

In the quarter under review, Murphy Oil’s revenues totaled $637.5 million, which missed the Zacks Consensus Estimate of $758 million by 15.8%. The top line increased 26.5% on a year-over-year basis.

In 2019, the company posted revenues of $2,829 million compared with $1,791.4 million in 2018.

Operational Highlights

The company attained 172 % organic reserve replacement with an average three-year total finding and development cost of $12.95 per barrel of oil equivalent.

Murphy Oil also completed the $500-million share repurchase program.

The company produced 194,000 barrels of oil equivalent per day (boe/d) in the fourth quarter, with 59% of oil and 67% of liquids.

In the quarter under review, Murphy Oil’s total costs and expenses amounted to $674.2 million, up 49.1% from $452.2 million in the prior-year quarter.

Operating loss from continuing operations came in at $36.7 million against operating income of $51.4 million in the prior-year quarter.  

The company incurred interest charges of $74.2 million, up from $47.3 million in the prior-year quarter.

Financial Condition

Murphy Oil had cash and cash equivalents of $306.8 million as of Dec 31, 2019 compared with $359.9 million as of Dec 31, 2018.

Net cash provided by continuing operations activities at the end of the fourth quarter was $335.8 million, higher than $148 million at the end of the fourth quarter of 2018.

Guidance

Murphy Oil expects net production including non-controlling interest for first-quarter 2020 in the range of 181,000-193,000 boe/d.

For 2020, production is estimated in the range of 190,000-202,000 boe/d. The company expects 2020 capital expenditure budget in the range of $1.4- $1.5 billion.

How Have Estimates Been Moving Since Then?

Estimates review followed a flat path over the past two months. The consensus estimate has shifted -28.57% due to these changes.

VGM Scores

Currently, Murphy Oil has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Murphy Oil has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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