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Is a Beat in Store for Schlumberger's (SLB) Q4 Earnings?

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Schlumberger Limited (SLB - Free Report) is expected to beat fourth-quarter 2020 earnings estimates when it reports results on Jan 22, before the opening bell.

In the last reported quarter, the leading oilfield service firm comfortably beat the Zacks Consensus Estimate, thanks to improved completion activities on drilled but uncompleted (DUC) wells in the onshore United States. It was offset partially by lower sales of WesternGeco multiclient seismic license in offshore North America. As far as earnings surprise is concerned, the Houston, TX-based company is on a firm footing as it beat the Zacks Consensus Estimate in the last four quarters, with the average being 10.9%. This is depicted in the graph below:

Schlumberger Limited Price and EPS Surprise

Schlumberger Limited Price and EPS Surprise

Schlumberger Limited price-eps-surprise | Schlumberger Limited Quote

Let’s see how things have shaped up prior to the upcoming earnings announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate of 17 cents per share has seen one upward and downward estimate revision each over the past 30 days. The estimated figure suggests a decline of 56.4% from the prior-year reported number.

Further, the Zacks Consensus Estimate for revenues of $5.2 billion indicates a 36.6% decline from the prior-year quarter.

What the Quantitative Model Suggests

Our proven model predicts an earnings beat for Schlumberger this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: Schlumberger has an Earnings ESP of +2.94%. This is because the Most Accurate Estimate for the quarter’s earnings is 18 cents per share while the Zacks Consensus Estimate is 17 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Schlumberger currently carries a Zacks Rank #3.

Factors Driving the Better-Than-Expected Earnings

In the fourth quarter, Schlumberger expects completion activities of DUC wells in the land market of the United States to have improved sequentially. This could have boosted the company’s profit levels. Moreover, it believes that there has been modest resumption of drilling operations in America and Canada in the fourth quarter. Prices of both West Texas Intermediate and Brent crude oil improved in the December quarter. This might have led to a rebound in drilling activities across shale plays, thereby boosting upstream spending. The bullish sentiment in the U.S. energy market is expected to have boosted Schlumberger’s bottom line.

Importantly, the company’s greater reliance on the lucrative international market is expected to have played a key role in the fourth quarter. In the overseas market, as most offshore projects are backed by national oil companies and integrated majors that target the long haul, short-term fluctuations have less effect on operations. As such, the international market is likely to have supported Schlumberger’s fourth-quarter earnings.

Other Stocks That Warrant a Look

Here are some other firms that you may want to consider as these too have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Diamondback Energy, Inc. (FANG - Free Report) has an Earnings ESP of +8.75% and a Zacks Rank of #1, currently. The company is scheduled to release quarterly earnings on Feb 22. You can see the complete list of today’s Zacks #1 Rank stocks here.

RPC, Inc. (RES - Free Report) has an Earnings ESP of +25.53% and is a Zacks #3 Ranked player. The company is scheduled to release fourth-quarter results on Jan 27. 

EOG Resources, Inc. (EOG - Free Report) has an Earnings ESP of +7.02% and a Zacks Rank of 3. It is scheduled to report fourth-quarter results on Feb 25.

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