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Schlumberger (SLB) to Report Q1 Earnings: What's in Store?

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Schlumberger Limited (SLB - Free Report) is scheduled to report first-quarter 2018 earnings on Apr 20, before the opening bell.

Last quarter, the company delivered a positive earnings surprise of 9.1%, courtesy of a surge in SIS software sales, ramp up of drilling operations in Colombia and Argentina along with higher pricing in North America’s onshore market. Moreover, Schlumberger delivered an average positive earnings surprise of 6.4% over the last four quarters.

Let’s see how things are shaping up prior to the announcement.   

Which Way Are Estimates Treading?

Let’s look at the estimate revisions to get a clear picture of analyst opinion on the stock before the earnings release.

The Zacks Consensus Estimate of 38 cents for the first quarter has been stable in the last seven days. The estimate reflects a year-over-year improvement of about 52%.

Further, analysts polled by Zacks expect revenues of $7,850 million for the first quarter, indicating a rise of13.9% from the year-ago quarter.

Factors to Consider

Schlumberger is the largest oilfield services player in the world with access to every energy market. Through all operating business segments, the company maintains its position as one of the key players.

For the Drilling Group segment, The Zacks Consensus Estimate for pretax operating profit is $299 million, significantly higher than $229 million reported in the first quarter of 2017.

Moreover, the Zacks Consensus Estimate for the Production Group business unit is pegged at $282 million, higher than $110 million in the prior-year quarter.

The Zacks Consensus Estimate for pretax operating income at the Reservoir Characterization segment is $290 million, higher than $281 million reported in the year-ago quarter.

Overall, higher crude price during the first quarter is expected to support oilfield players, involved in the setting up of oil wells.

The average monthly price of West Texas Intermediate (WTI) crude per barrel for the month of January, February and March of 2018 was recorded at $63.70, $62.23 and $62.73, respectively, per the U.S. Energy Information Administration. Notably, the average monthly WTI crude price has never touched $60 since 2015. Crude rally was supported primarily by continued production curbs from OPEC and its allies.

Nevertheless, we are concerned about Schlumberger’s lesser exposure to the U.S. shale plays – where more drillers have gathered following partial recovery in crude prices. Thus, Schlumberger is losing out on the opportunity to gain profitable contracts from shale drillers of late.

Price Performance in Q1

During the quarter, Schlumberger lost 3.9% compared with the industry’s 8.3% decline.

Earnings Whispers

Our proven model does not show that Schlumberger is likely to beat earnings this quarter. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP for the company is -2.22% as the Most Accurate estimate is pegged at 37 cents, while the Zacks Consensus Estimate is at 38 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Schlumberger carries a Zacks Rank #3, which when combined with earnings ESP of -2.22%, lowers the possibility of an earnings surprise.

Stocks to Consider

Though earnings beat looks uncertain for Kinder Morgan, here are some firms that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat this quarter:

Continental Resources, Inc (CLR - Free Report) is an independent oil and natural gas exploration and production company. The company has an Earnings ESP of +7.50% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Irving, TX, Pioneer Natural Resources Company (PXD - Free Report) is an independent oil and gas exploration and production company. The company has an Earnings ESP of +4.75% and carries a Zacks Rank #3.

Houston, TX-based EOG Resources, Inc (EOG - Free Report) is a major independent oil and gas exploration and production company. The company has an Earnings ESP of +14.04% and a Zacks Rank #3.

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