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How Will Oil Service ETFs Fare This Earnings Season?

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A lot has been said about oil price recovery over the past few months. U.S. crude ETF United States Oil (USO - Free Report)  and Brent crude United States Brent Oil (BNO - Free Report)  gained 13.9% and 13.4% in the past three months (as of Apr 12, 2021).

The continuation of the OPEC output cut and global economic improvement due to falling COVID-19 rates led to the rally. Widespread vaccination, the rollout of massive fiscal stimulus in the United States and a dovish Fed also contributed to the rally. 

Against this backdrop, a close monitoring of the energy space that deals with the extraction of oil is warranted. Notably, oil service companies currently belong to an unfavorable Zacks industry. Sudden rise in COVID cases may be responsible for this.

However, we need to focus on the past three-month earnings performances of these companies. Let’s delve into the earnings potential of the three big oilfield services companies (read: Top ETF Stories of First Quarter).

Inside Our Surprise Prediction

According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while companies with a Zacks Rank #4 or 5 (Sell rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The world’s largest oilfield service company Schlumberger Limited (SLB - Free Report) is likely to report on Apr 23, before market opens. Schlumberger has a Zacks Rank #3 and an ESP of +13.51%.

HalliburtonCompany (HAL - Free Report) is about to report on Apr 21. The stock has a Zacks Rank #1 and Earnings ESP of -0.82%.

Baker Hughes Company (BKR - Free Report) is about to report on Apr 2 and it has a Zacks Rank #3 and an ESP of +4.55%.

What’s in Store This Earnings Season?

As indicated above, chances of a broad-based earnings beat are moderate. This has reflected in the latest earnings estimates too, with Schlumberger’s current quarter EPS estimate of $0.19 increasing from $0.18 seven days back and $0.15 90 days ago.

The current-quarter EPS expectation for Halliburton has increased from $0.13 three months ago to $0.17 now. Baker Hughes’ current-quarter expectation has also gone up from $0.08 to $0.11 in the past three months.

Hence, investors pinning hopes on an upbeat earnings season must be keen on knowing how oil services ETFs like VanEck Vectors Oil Services ETF (OIH - Free Report) and iShares US Oil Equipment & Services ETF (IEZ - Free Report) are placed before their earnings releases. These funds have considerable exposure to the aforementioned stocks. The fund OIH is down 0.8% in the past three months period while IEZ is down 4.6% (see all Energy ETFs here).

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