Murphy Oil (NYSE:MUR) has had a mixed outlook from analysts, as they have been largely torn between which direction the company is going, and more than likely confusion has been added over the last couple of weeks because of the weakening EU economy and China inflation fears.
Much of what has been expected for a lot of companies has been downwardly revised, or at minimum put on hold, as there are too many macro-variable happening out there which could impact any company providing products for consumers, who seem to be getting skittish again, as the fast run-up in gold price show.
So with that in mind, it's difficult at this time to project where a company will go, as they're still attempting to recover from the great recession which is still lingering, and the possibility of being ravaged by the forces coming from the debt crisis in Europe and probable cutback in imports from China from measures they take to battle inflation.
What Murphy Oil has going for them is a low debt-to-capital ratio, which has positioned them to take advantage of weaknesses in the industry, which could help them to grow organically or through acquisitions.
The Exploration & Production segment of the company exploded in earnings growth over the first quarter last year, generating gains of 391 percent.
Now this quarter that is being challenged by the recent drop in prices, as it seems the higher oil inventories suggest people are still being tight with their wallets, and that could and probably will translate to pressure on their margins, and consequently earnings.
Even so, they may be able to turn product over quicker because of the debt-to-capital ratio, by generating more business, making the margin levels less important than overall sales.
Production is probably the key to their near-term performance, and that is one of the strengths of the company, and even with the economic challenges, they're probably in as good a place as any of their competitors no matter which way the winds blow to put up some pretty good earnings numbers.
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