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A lot is being said about oil price recovery over the last few months. Oil prices, in fact, have recovered significantly after the acute plunge it took earlier in the year. The recent rebound in oil prices came in mainly on reducing supply glut. Against this backdrop, a close monitoring of the energy space that deals with the extraction of oil is warranted (read: Best Oil Rally in 7 Years; 3 Energy ETF Winners).
Presently, the Zacks Industry Rank for oil service companies is in the bottom 45%. Thanks to this outright bearish backdrop, the sector is grabbing investors’ attention this earnings season as everyone is keen on finding out where the space is heading. 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 - Free Report) and Halliburton Company (HAL - Free Report) . Among the duo, Halliburton reported earnings results on July 20 before the market opened while Schlumberger reported the next day after the market closed.
Results in Detail
Halliburton – the second largest oil service company – came up with narrower-than-expected second-quarter 2016 loss. Nevertheless, lower pricing and reduced global activities – especially North American pressure pumping works – hurt results significantly over the year-ago quarter.
Loss per share from continuing operations came in at $0.14, narrower than the Zacks Consensus Estimate of a loss of $0.19. But the company had posted profits of $0.44 in second-quarter 2015. The company’s revenues of $3.84 billion surpassed the Zacks Consensus Estimate of $3.74 billion. The top line declined 35.2% year over year. Shares were down 1.6% in the key trading session.
On a bullish note, Halliburton expects rig count to step up modestly during the second half of 2016 and indicated that the ailing U.S. drilling may slowly turn around in the coming days.
Schlumberger – the world’s largest oilfield services provider – came up with a decent Q2. Adjusted earnings of $0.23 per share (excluding special items) edged past the Zacks Consensus Estimate of $0.22 but fell 74% from the year-ago number of $0.88. Also, the GAAP loss per share of the company was $1.56 versus earnings of $0.88 per share.
Continued decline in rig activity amid the oil price carnage was behind the year-over-year decline. Revenues were hit hard by sluggish activity, persistent price pressure and “a large-scale cutback in operations in Venezuela.”
Total revenue of $7.16 billion declined 20% year over year but beat the Zacks Consensus Estimate of $7.13 billion. The company cut another 8,000 jobs in Q2 after cutting a same amount in Q1. SLB lost over 0.3% after hours.
Market Impact
The space got mixed signals thanks to better-than-expected performances (on a proforma basis) from industry bellwethers, overshadowed slightly by weaker year-over-year results, which was in fact expected.
We would like to note that both companies indicate that the ‘worst may be over.’ With this, things might turn around for the positive in the days to come, though we believe it is likely to take time (read: Best Sector ETFs for Q3).
Still investors might want to know the impact on ETFs that are heavily invested in these popular oil service companies. Below, we have highlighted three oil-services ETFs with considerable allocation to SLB and HAL that could be in focus following oil-service earnings (see all energy ETFs here):
This ETF invests about $232.1 million of assets in 37 securities, focusing solely on the energy world. The iIn-focus SLB takes up the first position here with 21.66% of holdings.
Generally, when one stock accounts for as much as 21% of an ETF's weight, its individual performance decides much of the fund’s price movement. HAL takes up the second position with about 11.03% of total assets.
XLE invests $14.1 billion of assets in 39 stocks. The fund puts 8.57% of the portfolio weight in SLB, followed by 3.34% in HAL.
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After Earnings, What's in Store Oil Service ETFs?
A lot is being said about oil price recovery over the last few months. Oil prices, in fact, have recovered significantly after the acute plunge it took earlier in the year. The recent rebound in oil prices came in mainly on reducing supply glut. Against this backdrop, a close monitoring of the energy space that deals with the extraction of oil is warranted (read: Best Oil Rally in 7 Years; 3 Energy ETF Winners).
Presently, the Zacks Industry Rank for oil service companies is in the bottom 45%. Thanks to this outright bearish backdrop, the sector is grabbing investors’ attention this earnings season as everyone is keen on finding out where the space is heading. 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 - Free Report) and Halliburton Company (HAL - Free Report) . Among the duo, Halliburton reported earnings results on July 20 before the market opened while Schlumberger reported the next day after the market closed.
Results in Detail
Halliburton – the second largest oil service company – came up with narrower-than-expected second-quarter 2016 loss. Nevertheless, lower pricing and reduced global activities – especially North American pressure pumping works – hurt results significantly over the year-ago quarter.
Loss per share from continuing operations came in at $0.14, narrower than the Zacks Consensus Estimate of a loss of $0.19. But the company had posted profits of $0.44 in second-quarter 2015. The company’s revenues of $3.84 billion surpassed the Zacks Consensus Estimate of $3.74 billion. The top line declined 35.2% year over year. Shares were down 1.6% in the key trading session.
On a bullish note, Halliburton expects rig count to step up modestly during the second half of 2016 and indicated that the ailing U.S. drilling may slowly turn around in the coming days.
Schlumberger – the world’s largest oilfield services provider – came up with a decent Q2. Adjusted earnings of $0.23 per share (excluding special items) edged past the Zacks Consensus Estimate of $0.22 but fell 74% from the year-ago number of $0.88. Also, the GAAP loss per share of the company was $1.56 versus earnings of $0.88 per share.
Continued decline in rig activity amid the oil price carnage was behind the year-over-year decline. Revenues were hit hard by sluggish activity, persistent price pressure and “a large-scale cutback in operations in Venezuela.”
Total revenue of $7.16 billion declined 20% year over year but beat the Zacks Consensus Estimate of $7.13 billion. The company cut another 8,000 jobs in Q2 after cutting a same amount in Q1. SLB lost over 0.3% after hours.
Market Impact
The space got mixed signals thanks to better-than-expected performances (on a proforma basis) from industry bellwethers, overshadowed slightly by weaker year-over-year results, which was in fact expected.
We would like to note that both companies indicate that the ‘worst may be over.’ With this, things might turn around for the positive in the days to come, though we believe it is likely to take time (read: Best Sector ETFs for Q3).
Still investors might want to know the impact on ETFs that are heavily invested in these popular oil service companies. Below, we have highlighted three oil-services ETFs with considerable allocation to SLB and HAL that could be in focus following oil-service earnings (see all energy ETFs here):
iShares US Oil Equipment & Services ETF (IEZ - Free Report)
This ETF invests about $232.1 million of assets in 37 securities, focusing solely on the energy world. The iIn-focus SLB takes up the first position here with 21.66% of holdings.
Generally, when one stock accounts for as much as 21% of an ETF's weight, its individual performance decides much of the fund’s price movement. HAL takes up the second position with about 11.03% of total assets.
Market Vectors Oil Services ETF (OIH - Free Report)
OIH invests $883.3 million of assets in 26 holdings and devotes as much as 20.68% of the portfolio weight to SLB, followed by 15.50% in HAL.
Energy Select Sector SPDR Fund (XLE - Free Report)
XLE invests $14.1 billion of assets in 39 stocks. The fund puts 8.57% of the portfolio weight in SLB, followed by 3.34% in HAL.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>