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The oil price massacre, which started to rattle the investment world in the second half of 2014 and has been unsettling it occasionally since then, always keep oil service companies’ earnings on high alert. These help oil investors to take future calls on energy stocks.
This is especially true given the latest talks of OPEC curbing the production limit in the November meeting and a 9.9% jump in WTI crude ETF United States Oil (USO - Free Report) and an 8.1% advancement in Brent crude ETF United States Brent Oil (BNO - Free Report) in the last one month (as of October 20, 2016) (read: How to Trade the Oil Rush with ETFs).
Amid these circumstances, let’s delve a little deeper into the oilfield services earnings and see how things are shaping up for the space.
Results in Detail
Halliburton (HAL - Free Report) – the second largest oil service company – came up with a mixed Q3 on October 19, 2016 wherein earnings of $0.01 per share beat the Zacks Consensus Estimate of a loss of $0.07. Revenues of $3.833 billion missed the Zacks Consensus Estimate of $3.897 billion amid the oil price slump.
Shares were up 4.3% in the key trading session following the declaration of results. Halliburton indicated that the current industry uptrend would boost rig count further. Halliburton reported 9% sequential growth in North American sales that was mostly pared down by a 6% sequential decline in international revenue. HAL has a Zacks Rank #2 (Buy).
On October 20 after the closing bell, Schlumberger (SLB - Free Report) – the world’s largest oilfield services provider – came up with a mixed Q3. Adjusted earnings came in at $0.25 per share, which edged past the Zacks Consensus Estimate of $0.22. However, earnings fell 68% from the year-ago level.
The total revenue of $7.019 billion declined 17% year over year and fell shy of the Zacks Consensus Estimate of $7.130 billion. However, the company sounded hopeful on the future movement of oil prices as it indicated that “the supply and demand of crude is now more or less balanced” in the global oil market (read: If Oil Continues to Soar, These 7 ETFs May Fall).
Reducing petroleum inventory levels and the beginning of persistent drawdowns toward the end of the quarter mainly in North America should help the oil price movement. Plus, if the OPEC decides to cut the output level in November, that would offer the oil patch a shot in the arm.
But management also indicated, “In terms of 2017 E&P investment, visibility remains limited as our customers are still in the planning process.” Financial strain is rife in the industry, though activity may tick up in North America land, the Middle East and Russia markets next year. Shares slumped only 0.02% after hours (read: ETF Strategies for Q4).
Market Impact
Overall, the space got mixed signals from the results and outlook from industry bellwethers. The worst seems to be over the space, but things will take more time to return to the pre-crisis level. So, 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 $219.8 million of assets in 37 securities, focusing solely on the energy world. The in-focus SLB takes up the first position here with 19.55% of holdings. Generally, when one stock accounts for about 20% of an ETF's weight, its individual performance decides much of the fund’s price movement. HAL takes up the second position with about 10.85% of total assets.
Image: Bigstock
What Do Q3 Earnings Say About Oil Service ETFs?
The oil price massacre, which started to rattle the investment world in the second half of 2014 and has been unsettling it occasionally since then, always keep oil service companies’ earnings on high alert. These help oil investors to take future calls on energy stocks.
This is especially true given the latest talks of OPEC curbing the production limit in the November meeting and a 9.9% jump in WTI crude ETF United States Oil (USO - Free Report) and an 8.1% advancement in Brent crude ETF United States Brent Oil (BNO - Free Report) in the last one month (as of October 20, 2016) (read: How to Trade the Oil Rush with ETFs).
Amid these circumstances, let’s delve a little deeper into the oilfield services earnings and see how things are shaping up for the space.
Results in Detail
Halliburton (HAL - Free Report) – the second largest oil service company – came up with a mixed Q3 on October 19, 2016 wherein earnings of $0.01 per share beat the Zacks Consensus Estimate of a loss of $0.07. Revenues of $3.833 billion missed the Zacks Consensus Estimate of $3.897 billion amid the oil price slump.
Shares were up 4.3% in the key trading session following the declaration of results. Halliburton indicated that the current industry uptrend would boost rig count further. Halliburton reported 9% sequential growth in North American sales that was mostly pared down by a 6% sequential decline in international revenue. HAL has a Zacks Rank #2 (Buy).
On October 20 after the closing bell, Schlumberger (SLB - Free Report) – the world’s largest oilfield services provider – came up with a mixed Q3. Adjusted earnings came in at $0.25 per share, which edged past the Zacks Consensus Estimate of $0.22. However, earnings fell 68% from the year-ago level.
The total revenue of $7.019 billion declined 17% year over year and fell shy of the Zacks Consensus Estimate of $7.130 billion. However, the company sounded hopeful on the future movement of oil prices as it indicated that “the supply and demand of crude is now more or less balanced” in the global oil market (read: If Oil Continues to Soar, These 7 ETFs May Fall).
Reducing petroleum inventory levels and the beginning of persistent drawdowns toward the end of the quarter mainly in North America should help the oil price movement. Plus, if the OPEC decides to cut the output level in November, that would offer the oil patch a shot in the arm.
But management also indicated, “In terms of 2017 E&P investment, visibility remains limited as our customers are still in the planning process.” Financial strain is rife in the industry, though activity may tick up in North America land, the Middle East and Russia markets next year. Shares slumped only 0.02% after hours (read: ETF Strategies for Q4).
Market Impact
Overall, the space got mixed signals from the results and outlook from industry bellwethers. The worst seems to be over the space, but things will take more time to return to the pre-crisis level. So, 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 $219.8 million of assets in 37 securities, focusing solely on the energy world. The in-focus SLB takes up the first position here with 19.55% of holdings. Generally, when one stock accounts for about 20% of an ETF's weight, its individual performance decides much of the fund’s price movement. HAL takes up the second position with about 10.85% of total assets.
Market Vectors Oil Services ETF (OIH - Free Report)
OIH invests $989 million of assets in 26 holdings and devotes as much as 19.23% of the portfolio weight to SLB, followed by 14.84% in HAL.
Energy Select Sector SPDR Fund (XLE - Free Report)
XLE invests $15.4 billion of assets in 38 stocks. The fund puts 8.59% of the portfolio weight in SLB, followed by 3.59% in HAL.
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