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What's In Store for Oil Services ETFs This Earnings Season?

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Big oil services companies will start releasing their quarterly numbers from this week. The outlook is bullish this time thanks to the upbeat oil market. Let’s delve into the earnings potential of the big six banking companies that could regulate the performance of the sector ahead.

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.

Investors should note that oil prices have been among the most-typed investment words this year. United States Oil Fund, LP (USO - Free Report) has advanced 50% this year but added only 2.7% in Q2. The coronavirus vaccine rollout is gradually helping to control the spread of the outbreak across the globe.

Factors like easing Omicron concerns, supply shortages, and geopolitical tensions in Eastern Europe and the Middle East have thus boosted oil prices this year. Russia is oil rich and hence West’s abandonment of Russia has made the supply matter worse and boosted oil prices.

Inside Our Surprise Prediction

Schlumberger (SLB - Free Report) is likely to report on Jul 22. SLB has a Zacks Rank #2 (Buy) and an Earnings ESP of +1.40%.

Halliburton (HAL - Free Report) is likely to report on Jul 19. HAL has a Zacks Rank #2 and an Earnings ESP of +2.73%.

What’s in Store This Earnings Season?

As discussed above, the chances of a broad-based earnings beat are higher, thanks to higher oil prices. This has been reflected in the latest earnings estimates too, with Halliburton’s current quarter EPS estimate of $0.45 rising from $0.42 three months ago.

The current-quarter EPS expectation for Schlumberger has gained from $0.39 one week ago to $0.40 now.

ETFs in Focus

Schlumberger has exposure to ETFs like iShares U.S. Oil Equipment & Services ETF (IEZ - Free Report) (21.91% exposure), VanEck Oil Services ETF (OIH - Free Report) (19.34% exposure) and Invesco Dynamic Oil & Gas Services ETF (PXJ - Free Report) (5.19% exposure).

Halliburton too has the same exposure. iShares U.S. Oil Equipment & Services ETF (with 21.97% exposure), VanEck Oil Services ETF (OIH - Free Report) (with 12.22% exposure) and Invesco Dynamic Oil & Gas Services ETF (PXJ - Free Report) (with 5.14% exposure) are top three ETFs that are heavily-focused on Halliburton.

What Lies in Q3?

Recessionary fears are rife. The Fed raised interest rates by 75 bps in its latest FOMC meeting — the biggest increase since 1994 — and signaled continued tightening ahead, which could further weigh on risk-on trade sentiments. The U.S. yield curve inverted, giving cues of a recession. So, even if the outlook for Q3 may not come across as extremely upbeat, investors probably can count on Q2 earnings.