Marathon (MRO) reported weaker-than-expected fourthquarter 2007 results, primarily reflecting the impact of sharply lower refining margins. While we expect the downstream weakness to persist through the next few quarters, our long-term view of the business continues to remain favorable. Our reduced 2008 EPS estimate ($6.20 vs. $6.59) reflects this view.
However, we continue to like Marathon shares for its repositioned upstream asset portfolio and its best-in-class Midwest-focused downstream business. We also like the company's recent foray in the Canadian oil sands through its purchase of Western Oil Sands.
Outlook for the company's upstream business has also steadily improved, driven by a detailed lineup of development projects coming off its successful exploration program. Our new $60 price objective, reduced from $63 before, reflects 2008 P/E and P/CF multiples of 9.7x and 5.9x, respectively. Our target multiples are well within the company s historical trading ranges.
Read the full analyst report on MRO.
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