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Energy Rally May Help Oil Services ETFs Survive Weak Earnings
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A lot has been said about the oil price rally over the last few days. Oil prices have been surging over the past few weeks, thanks to supply disruptions and rising demand. Brent crude prices topped $85 per barrel lately, for the first time since late 2014, and up about 125% from the end of last October. Per WSJ, many traders are again betting that crude would top $100 a barrel by the year-end.
Such a scenario bodes well for the entire energy space. Against this backdrop, a close monitoring of the area which deals with oil field services, is warranted. Let’s delve a little deeper into the earnings picture and see how things are shaping up for the space.
In this piece, we have considered two stocks, namely – Schlumberger Ltd. SLB and Halliburton Company HAL, which reported earnings results on Oct 22 and Oct 19, respectively.
Earnings in Focus
Schlumberger — the world’s largest oilfield services provider — announced third-quarter 2021 earnings of 36 cents per share (excluding charges and credits), in line with the Zacks Consensus Estimate. The bottom line increased significantly from the year-ago quarter’s profit of 16 cents.
The oilfield service giant recorded total revenues of $5.847 billion, which missed the Zacks Consensus Estimate of $5.940 billion but improved 11% from the year-ago quarter’s $5.258 billion.
The quarterly earnings were aided by a surge in stimulation activity in Argentina, stronger North American rig activity along with ramped up drilling operations at offshore and onshore international resources. This was offset by lower contributions related to Digital & Integration from Europe/CIS/Africa.
Halliburton Company reported in-line third-quarter 2021 earnings on the back of an improved year-over-year revenue contribution from North America activities, partially offset by a lower-than-expected operating income from the Completion and Production segment as well as the Drilling and Evaluation segment.
This world's second-largest oilfield services company after reported earnings of 28 cents per share, matching the Zacks Consensus Estimate. The bottom line improved from the year-ago quarter’s earnings of 11 cents. Revenues of $3.86 billion missed the Zacks Consensus Estimate of $3.91 billion. The top line, however, improved from the year-ago quarter’s sales of $2.98 billion. HAL shares are down 0.9%.
Market Impact
Investors might want to know the impact of earnings results on ETFs that are heavily invested in these popular oil service companies. Below we highlight three oil-services ETFs with considerable allocation to SLB and HAL that could be in focus:
OIH invests $3.07 billion of assets in about 25 holdings and devotes as much as 20.56% of the portfolio weight to SLB, followed by 13% in HAL. Generally, when one stock accounts for as much as 20% of an ETF's weight, its individual performance decides much of the fund’s price movement. The fund is down 1.8% past week.
This ETF invests about $113.6 million of assets in about 30 securities, focusing solely on the energy world. The in-focus SLB takes up the first position here with 23.78% of holdings. HAL takes up the third position with about 5% of total assets. The fund is off 2.6% past week.
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Energy Rally May Help Oil Services ETFs Survive Weak Earnings
A lot has been said about the oil price rally over the last few days. Oil prices have been surging over the past few weeks, thanks to supply disruptions and rising demand. Brent crude prices topped $85 per barrel lately, for the first time since late 2014, and up about 125% from the end of last October. Per WSJ, many traders are again betting that crude would top $100 a barrel by the year-end.
Such a scenario bodes well for the entire energy space. Against this backdrop, a close monitoring of the area which deals with oil field services, is warranted. Let’s delve a little deeper into the earnings picture and see how things are shaping up for the space.
In this piece, we have considered two stocks, namely – Schlumberger Ltd. SLB and Halliburton Company HAL, which reported earnings results on Oct 22 and Oct 19, respectively.
Earnings in Focus
Schlumberger — the world’s largest oilfield services provider — announced third-quarter 2021 earnings of 36 cents per share (excluding charges and credits), in line with the Zacks Consensus Estimate. The bottom line increased significantly from the year-ago quarter’s profit of 16 cents.
The oilfield service giant recorded total revenues of $5.847 billion, which missed the Zacks Consensus Estimate of $5.940 billion but improved 11% from the year-ago quarter’s $5.258 billion.
The quarterly earnings were aided by a surge in stimulation activity in Argentina, stronger North American rig activity along with ramped up drilling operations at offshore and onshore international resources. This was offset by lower contributions related to Digital & Integration from Europe/CIS/Africa.
Halliburton Company reported in-line third-quarter 2021 earnings on the back of an improved year-over-year revenue contribution from North America activities, partially offset by a lower-than-expected operating income from the Completion and Production segment as well as the Drilling and Evaluation segment.
This world's second-largest oilfield services company after reported earnings of 28 cents per share, matching the Zacks Consensus Estimate. The bottom line improved from the year-ago quarter’s earnings of 11 cents. Revenues of $3.86 billion missed the Zacks Consensus Estimate of $3.91 billion. The top line, however, improved from the year-ago quarter’s sales of $2.98 billion. HAL shares are down 0.9%.
Market Impact
Investors might want to know the impact of earnings results on ETFs that are heavily invested in these popular oil service companies. Below we highlight three oil-services ETFs with considerable allocation to SLB and HAL that could be in focus:
VanEck Vectors Oil Services ETF (OIH - Free Report)
OIH invests $3.07 billion of assets in about 25 holdings and devotes as much as 20.56% of the portfolio weight to SLB, followed by 13% in HAL. Generally, when one stock accounts for as much as 20% of an ETF's weight, its individual performance decides much of the fund’s price movement. The fund is down 1.8% past week.
iShares US Oil Equipment & Services ETF (IEZ - Free Report)
This ETF invests about $113.6 million of assets in about 30 securities, focusing solely on the energy world. The in-focus SLB takes up the first position here with 23.78% of holdings. HAL takes up the third position with about 5% of total assets. The fund is off 2.6% past week.
Energy Select Sector SPDR Fund (XLE - Free Report)
XLE invests about $28.13 billion of assets in 27 stocks. The fund puts 4.88% of the portfolio weight in SLB. The fund has been flat past week.