Murphy Oil (MUR) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.
The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this oil and gas producer, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
For Murphy Oil, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
For the current quarter, the company is expected to earn $0.90 per share, which is a change of +119.5% from the year-ago reported number.
Over the last 30 days, the Zacks Consensus Estimate for Murphy Oil has increased 51.69% because five estimates have moved higher compared to no negative revisions.
Current-Year Estimate Revisions
For the full year, the company is expected to earn $3.65 per share, representing a year-over-year change of +166.4%.
The revisions trend for the current year also appears quite promising for Murphy Oil, with three estimates moving higher over the past month compared to one negative revision. The consensus estimate has also received a boost over this time frame, increasing 37.22%.
Favorable Zacks Rank
The promising estimate revisions have helped Murphy Oil earn a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
Bottom Line
Murphy Oil shares have added 22.1% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.
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Murphy Oil Corporation (MUR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).