We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
HAL or SLB: Which Oil Stock Looks Better Ahead of Q4 Earnings?
Read MoreHide Full Article
Kinder Morgan Inc. (KMI - Free Report) reported fourth-quarter results on Jan 17, kicking off the earnings season for the energy space.
Now, oil service companies — providers of technical products and services to drillers of oil and gas wells — are slated to release October-to-December numbers in the coming weeks. These reports are likely to provide a better understanding of the energy sector’s performance this earnings season. In particular, key oil services earnings reports scheduled for release this week and the next are that of Schlumberger Ltd. (SLB - Free Report) and Halliburton (HAL - Free Report) .
The world’s largest oilfield services provider Schlumberger is expected to report on Jan 19, while smaller rival Halliburton will post its fourth-quarter numbers on Jan 22.
During the fourth-quarter 2017, Halliburton clearly outpaced Schlumberger and the industry in terms of price performance. Halliburton rallied 6.2% against the respective 3.4% and 1.9% declines of Schlumberger and the industry.
Free Cash Flow Yields
Companies with strong operations generally have high free cash flow yield, indicating that the amount of money investors are generating is more than the amount spent on the stock.
Our proprietary model shows that free cash flow yield for Halliburton stands at 3.7%, slightly higher than 3.5% of Schlumberger.
Earnings History and ESP
Halliburton has an incredible history when it comes to beating earnings estimates. The company has consistently surpassed the Zacks Consensus Estimate for earnings since mid-2014. As far as recent history is concerned, the Texas-based firm delivered an earnings beat in each of the trailing four quarters, the average positive earnings surprise being 41.2%. Meanwhile, Schlumberger has managed to beat earnings in one of the last four quarters, the average positive earnings surprise being a modest 4.2%.
Considering Earnings ESP as well, Halliburton is likely to beat earnings in this upcoming quarter. This is because the stock has the right combination of two key ingredients — an Earnings ESP of +0.46% and a Zacks Rank #3.
The picture is different for Schlumberger as the stock has an Earnings ESP of -1.87%.
Earnings Expectations for 2018
The Zacks Consensus Estimate for Halliburton’s 2018 earnings currently stands at $2.19 per share, representing year-over-year growth of 89.1%.
For Schlumberger, the same is pegged lower at $2.15 per share, reflecting growth of 47.4%.
Valuation
Halliburton and Schlumberger are overvalued when compared to the Zacks Oil & Gas–Field Services industry. For this, we have employed the EV/EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization) ratio, which is often used to value oil and gas stocks, given their significant debt levels and high depreciation and amortization expenses.
With an EV/EBITDA ratio of 18.37, Halliburton is overvalued compared to the industry’s 10.57, though Schlumberger also looks pricey compared to the industry; its EV/EBITDA ratio of 15.98 lends it an advantage over Halliburton.
Dividend Yield & Debt Burden
Schlumberger’s current dividend yield of 2.6% is significantly higher than 1.4% of Halliburton. Also, over the past year, the dividend yield of Schlumberger has been consistently higher than Halliburton.
Schlumberger has a lower leverage as evident by its debt-to-capital ratio of 28.4% compared with Halliburton’s 55.6%.
Bottom Line
Halliburton clearly scores higher in terms of share price movement, earnings surprise history and free cash flow yield. On top of that, the company has a much higher ESP reading of +0.46% as against Schlumberger’s -1.87%.
However, Schlumberger holds an advantage when it comes to dividend yield and valuation. The stock also has less exposure to debt.
Overall, our comparative analysis shows that Halliburton has an edge over Schlumberger on most of the parameters.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Image: Bigstock
HAL or SLB: Which Oil Stock Looks Better Ahead of Q4 Earnings?
Kinder Morgan Inc. (KMI - Free Report) reported fourth-quarter results on Jan 17, kicking off the earnings season for the energy space.
Now, oil service companies — providers of technical products and services to drillers of oil and gas wells — are slated to release October-to-December numbers in the coming weeks. These reports are likely to provide a better understanding of the energy sector’s performance this earnings season. In particular, key oil services earnings reports scheduled for release this week and the next are that of Schlumberger Ltd. (SLB - Free Report) and Halliburton (HAL - Free Report) .
The world’s largest oilfield services provider Schlumberger is expected to report on Jan 19, while smaller rival Halliburton will post its fourth-quarter numbers on Jan 22.
Here, we take a closer look at which of these stocks is better placed, although both carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Analysis
We have assessed the stocks on six parameters.
Price Performance
During the fourth-quarter 2017, Halliburton clearly outpaced Schlumberger and the industry in terms of price performance. Halliburton rallied 6.2% against the respective 3.4% and 1.9% declines of Schlumberger and the industry.
Free Cash Flow Yields
Companies with strong operations generally have high free cash flow yield, indicating that the amount of money investors are generating is more than the amount spent on the stock.
Our proprietary model shows that free cash flow yield for Halliburton stands at 3.7%, slightly higher than 3.5% of Schlumberger.
Earnings History and ESP
Halliburton has an incredible history when it comes to beating earnings estimates. The company has consistently surpassed the Zacks Consensus Estimate for earnings since mid-2014. As far as recent history is concerned, the Texas-based firm delivered an earnings beat in each of the trailing four quarters, the average positive earnings surprise being 41.2%. Meanwhile, Schlumberger has managed to beat earnings in one of the last four quarters, the average positive earnings surprise being a modest 4.2%.
Considering Earnings ESP as well, Halliburton is likely to beat earnings in this upcoming quarter. This is because the stock has the right combination of two key ingredients — an Earnings ESP of +0.46% and a Zacks Rank #3.
The picture is different for Schlumberger as the stock has an Earnings ESP of -1.87%.
Earnings Expectations for 2018
The Zacks Consensus Estimate for Halliburton’s 2018 earnings currently stands at $2.19 per share, representing year-over-year growth of 89.1%.
For Schlumberger, the same is pegged lower at $2.15 per share, reflecting growth of 47.4%.
Valuation
Halliburton and Schlumberger are overvalued when compared to the Zacks Oil & Gas–Field Services industry. For this, we have employed the EV/EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization) ratio, which is often used to value oil and gas stocks, given their significant debt levels and high depreciation and amortization expenses.
With an EV/EBITDA ratio of 18.37, Halliburton is overvalued compared to the industry’s 10.57, though Schlumberger also looks pricey compared to the industry; its EV/EBITDA ratio of 15.98 lends it an advantage over Halliburton.
Dividend Yield & Debt Burden
Schlumberger’s current dividend yield of 2.6% is significantly higher than 1.4% of Halliburton. Also, over the past year, the dividend yield of Schlumberger has been consistently higher than Halliburton.
Schlumberger has a lower leverage as evident by its debt-to-capital ratio of 28.4% compared with Halliburton’s 55.6%.
Bottom Line
Halliburton clearly scores higher in terms of share price movement, earnings surprise history and free cash flow yield. On top of that, the company has a much higher ESP reading of +0.46% as against Schlumberger’s -1.87%.
However, Schlumberger holds an advantage when it comes to dividend yield and valuation. The stock also has less exposure to debt.
Overall, our comparative analysis shows that Halliburton has an edge over Schlumberger on most of the parameters.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>