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After SLB & HAL's Strong Q4, 3 Oil Service Stocks Looking Up
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Oil services behemoths Schlumberger (SLB - Free Report) and Halliburton (HAL - Free Report) have kick-started the fourth quarter energy earnings season in style. Results of the two biggies – providers of technical products and services to drillers of oil and gas wells – are closely followed events. They serve as barometers of oilfield activity, providing a glimpse into demand trends for energy services like drilling, completion, production.
Schlumberger, Halliburton Comes Up with Upbeat Q4
The world’s largest oilfield services provider, Schlumberger, reported fourth-quarter 2017 earnings of 48 cents per share (excluding charges and credits), ahead of the Zacks Consensus Estimate of 44 cents and the year-ago figure of 27 cents. Surge in SIS software sales, ramp up of drilling operations in Colombia and Argentina along with higher pricing in North America’s onshore market supported the strong fourth-quarter results.
Smaller rival Halliburton reported better-than-expected fourth quarter profit thanks to improved utilization and pricing gains in North America -- the company’s largest market by sales. Halliburton’s income from continuing operation (adjusted for Venezuela write-downs and charges associated with U.S. tax reform) came in at 53 cents per share, above the Zacks Consensus Estimate of 46 cents – the fourteenth consecutive quarterly outperformance. Moreover, revenues of $5,940 million beat the Zacks Consensus Estimate of $5,567 million.
The Road Ahead
Both companies, apart from coming out with estimate beating numbers, indicated that activity in North America remain strong even as the international market continues to improve.
Schlumberger, which plans to exit its marine and land seismic acquisition services, believes that the positive oil market sentiment will push up North American investment by upstream operators. Meanwhile, the international market is expected to witness 5% higher spending in 2018 following three years of decline.
Halliburton also sounded optimistic in its view that the North American land market is improving rapidly, driven by increased utilization and pricing, particularly for pressure pumping. Additionally, the outlook for Halliburton’s international market continues to improve. In fact, regional sales were up 11% sequentially in the fourth-quarter on the back of strong activity gains across a number of product services lines in Latin America, as well as increases in drilling and stimulation activity in the Eastern Hemisphere.
What the Positive Results Mean for the Oilfield Services Sector
The strong earnings reports naturally pleased investors. Consequently, shares of Schlumberger and Halliburton have surged 4% and 7% since their respective releases. Moreover, the companies' positive outlook for their U.S. and international operations bode well for the health of the oil industry. As it is, crude has been on a stellar run over the past few months.
The U.S. oil benchmark wrapped up a strong fourth-quarter amid continued declines in domestic inventories and an improving supply-demand narrative. With fundamentals pointing to a tighter market, oil ended 2017 at $60.42 per barrel – the first settlement above $60 since June 2015. A year ago, crude futures hovered around the $53 per barrel mark.
Importantly, higher commodity prices continue to spur U.S. production to near-record levels supporting the surge in oil production and drilling activity. The U.S. rig count has jumped around 35% from same time last year, reflecting strong demand for oilfield services. And unlike the past few quarters, the tight domestic market is complemented by a gradually improving foreign business that is witnessing a spurt in tendering activity.
Overall, the improving macro scenario is likely to translate into significant cash flows for the oilfield service operators.
The Zacks Rank is a reliable tool that helps you to trade with confidence regardless of your trading style and risk tolerance. To learn more about how you can use this proven system for market-beating gains, visit Zacks Rank Education.
Finally, the chosen ones have VGM Score less than or equal to B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or #2 offer the best upside potential.
Moreover, these stocks are experiencing positive estimate revisions ahead of their earnings release.
Solaris Oilfield Infrastructure, Inc. (SOI - Free Report)
Based in Houston, TX, Solaris provides sophisticated and cost-effective solutions to enhance hydraulic fracturing operations at oil and gas well sites throughout the U.S.
Shares of this Zacks Rank #1 stock with a VGM Score of B have gained 47.5% in the last three months. The Zacks Consensus Estimate has moved up 5% over the past 60 days for the fourth quarter. The company is expected to report its results on Feb 1.
The Zacks Consensus Estimate for the quarter is currently at 20 cents, reflecting 66.7% quarter-over-quarter growth. The company has an average positive earnings surprise of 239% in the last four quarters.
C&J Energy Services, Inc.
C&J Energy Services offers services related to completion and production to the energy industry in North America.
The company has a Zacks Rank #2 and a VGM Score of A. The stock price has gained 41.3% in the past three months.
The earnings estimate for the fourth quarter has improved over the last 60 days from 25 cents to 26 cents. The company beat the Zacks Consensus Estimate last quarter by 142.9% and has a good track of having outperformed estimates in two of the last three quarters. It is expected to report its results before the market opens on Feb 22.
Founded in 2005, ProPetro Holding is an oilfield services company that primarily offers hydraulic fracturing to major oil and gas operators.
ProPetro currently carries a Zacks Rank #2 and a VGM Score of B. ProPetro has seen its shares shoot up roughly 63% in the last three months. The Zacks Consensus Estimate has moved north 6% over the past 60 days for the fourth quarter.
The company is expected to report its results on Feb 7. The Zacks Consensus Estimate for the quarter is pegged at 37 cents, reflecting an impressive 48% sequential growth. The company delivered an earnings surprise of 25% in the last quarter.
Bottom Line
At this juncture, these possible winners backed by a solid Zacks Rank, VGM Score and positive earnings revision estimates could be a great way to play the fourth-quarter earnings season.
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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After SLB & HAL's Strong Q4, 3 Oil Service Stocks Looking Up
Oil services behemoths Schlumberger (SLB - Free Report) and Halliburton (HAL - Free Report) have kick-started the fourth quarter energy earnings season in style. Results of the two biggies – providers of technical products and services to drillers of oil and gas wells – are closely followed events. They serve as barometers of oilfield activity, providing a glimpse into demand trends for energy services like drilling, completion, production.
Schlumberger, Halliburton Comes Up with Upbeat Q4
The world’s largest oilfield services provider, Schlumberger, reported fourth-quarter 2017 earnings of 48 cents per share (excluding charges and credits), ahead of the Zacks Consensus Estimate of 44 cents and the year-ago figure of 27 cents. Surge in SIS software sales, ramp up of drilling operations in Colombia and Argentina along with higher pricing in North America’s onshore market supported the strong fourth-quarter results.
Smaller rival Halliburton reported better-than-expected fourth quarter profit thanks to improved utilization and pricing gains in North America -- the company’s largest market by sales. Halliburton’s income from continuing operation (adjusted for Venezuela write-downs and charges associated with U.S. tax reform) came in at 53 cents per share, above the Zacks Consensus Estimate of 46 cents – the fourteenth consecutive quarterly outperformance. Moreover, revenues of $5,940 million beat the Zacks Consensus Estimate of $5,567 million.
The Road Ahead
Both companies, apart from coming out with estimate beating numbers, indicated that activity in North America remain strong even as the international market continues to improve.
Schlumberger, which plans to exit its marine and land seismic acquisition services, believes that the positive oil market sentiment will push up North American investment by upstream operators. Meanwhile, the international market is expected to witness 5% higher spending in 2018 following three years of decline.
Halliburton also sounded optimistic in its view that the North American land market is improving rapidly, driven by increased utilization and pricing, particularly for pressure pumping. Additionally, the outlook for Halliburton’s international market continues to improve. In fact, regional sales were up 11% sequentially in the fourth-quarter on the back of strong activity gains across a number of product services lines in Latin America, as well as increases in drilling and stimulation activity in the Eastern Hemisphere.
What the Positive Results Mean for the Oilfield Services Sector
The strong earnings reports naturally pleased investors. Consequently, shares of Schlumberger and Halliburton have surged 4% and 7% since their respective releases. Moreover, the companies' positive outlook for their U.S. and international operations bode well for the health of the oil industry. As it is, crude has been on a stellar run over the past few months.
The U.S. oil benchmark wrapped up a strong fourth-quarter amid continued declines in domestic inventories and an improving supply-demand narrative. With fundamentals pointing to a tighter market, oil ended 2017 at $60.42 per barrel – the first settlement above $60 since June 2015. A year ago, crude futures hovered around the $53 per barrel mark.
Importantly, higher commodity prices continue to spur U.S. production to near-record levels supporting the surge in oil production and drilling activity. The U.S. rig count has jumped around 35% from same time last year, reflecting strong demand for oilfield services. And unlike the past few quarters, the tight domestic market is complemented by a gradually improving foreign business that is witnessing a spurt in tendering activity.
Overall, the improving macro scenario is likely to translate into significant cash flows for the oilfield service operators.
How to Pick the Right Stocks?
To guide investors to the right picks, we highlight three oilfield service stocks that carry a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Rank is a reliable tool that helps you to trade with confidence regardless of your trading style and risk tolerance. To learn more about how you can use this proven system for market-beating gains, visit Zacks Rank Education.
Finally, the chosen ones have VGM Score less than or equal to B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or #2 offer the best upside potential.
Moreover, these stocks are experiencing positive estimate revisions ahead of their earnings release.
Solaris Oilfield Infrastructure, Inc. (SOI - Free Report)
Based in Houston, TX, Solaris provides sophisticated and cost-effective solutions to enhance hydraulic fracturing operations at oil and gas well sites throughout the U.S.
Shares of this Zacks Rank #1 stock with a VGM Score of B have gained 47.5% in the last three months. The Zacks Consensus Estimate has moved up 5% over the past 60 days for the fourth quarter. The company is expected to report its results on Feb 1.
The Zacks Consensus Estimate for the quarter is currently at 20 cents, reflecting 66.7% quarter-over-quarter growth. The company has an average positive earnings surprise of 239% in the last four quarters.
C&J Energy Services, Inc.
C&J Energy Services offers services related to completion and production to the energy industry in North America.
The company has a Zacks Rank #2 and a VGM Score of A. The stock price has gained 41.3% in the past three months.
The earnings estimate for the fourth quarter has improved over the last 60 days from 25 cents to 26 cents. The company beat the Zacks Consensus Estimate last quarter by 142.9% and has a good track of having outperformed estimates in two of the last three quarters. It is expected to report its results before the market opens on Feb 22.
ProPetro Holding Corp. (PUMP - Free Report)
Founded in 2005, ProPetro Holding is an oilfield services company that primarily offers hydraulic fracturing to major oil and gas operators.
ProPetro currently carries a Zacks Rank #2 and a VGM Score of B. ProPetro has seen its shares shoot up roughly 63% in the last three months. The Zacks Consensus Estimate has moved north 6% over the past 60 days for the fourth quarter.
The company is expected to report its results on Feb 7. The Zacks Consensus Estimate for the quarter is pegged at 37 cents, reflecting an impressive 48% sequential growth. The company delivered an earnings surprise of 25% in the last quarter.
Bottom Line
At this juncture, these possible winners backed by a solid Zacks Rank, VGM Score and positive earnings revision estimates could be a great way to play the fourth-quarter earnings season.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>