Leading oilfield services company, Schlumberger Limited SLB is set to report third-quarter 2015 results on Oct 15, after the market closes.
In the last reported quarter, the company’s earnings of 88 cents per share had decreased from $1.37 a year ago. The results however came above the Zacks Consensus Estimate of 79 cents. The year-over-year decline had stemmed from a severe fall in North American land activity and the related pricing pressure. International operations were affected by reduced customer spending along with customer budget cuts and pricing concession.
Will Schlumberger impress with its upcoming release after combating some serious challenges it witnessed in the three-month period ended Sep 30? Let’s see what factors might have influenced the earnings report this time around:
Q3 Flashback
Schlumberger’s overall picture for the third quarter of 2015 remains closely tied to the persistent fall in crude prices. WTI and Brent witnessed similar declines owing to an oversupplied market. The strength of the dollar against other currencies also made oil dearer for importers, thus contributing to the slump.
The overall market remained jittery purely due to a declining rig count, weak Chinese demand and weak jobs numbers from the domestic space. Also, the threat of a White House veto is hanging over the lifting of the oil export ban. Yet, Schlumberger is optimism on longer-term growth supported by its cost-containment measures and focused international spending on exploration, higher production and stepped-up activity.
The oilfield services behemoth believes that strong leverage to the deepwater segment will aid its performance over the coming years. While the company makes the most of its money outside North America, it bears the brunt of industry-wide weakness in U.S. hydraulic fracturing services as well as softness in the land coiled-tubing business.
Schlumberger’s activities during the quarter proved inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate declined to 77 cents from 79 cents per share over the last 30 days.
Earnings Whispers
Our proven model does not conclusively show that Schlumberger is likely to beat the Zacks Consensus Estimate in the third quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The Earnings ESP for Schlumberger is -1.30%. This is because the Most Accurate estimate and the Zacks Consensus Estimate stand at 76 cents and 77 cents, respectively.
Zacks Rank: Schlumberger has a Zacks Rank #3, which increases the predictive power. But the company’s negative ESP leaves our surprise prediction inconclusive.
We caution against Sell-rated stocks with a Zacks Rank #4 or 5 going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Callon Petroleum Company CPE has Earnings ESP of +150.00% and a Zacks Rank #2. It will be reporting results on Nov 4.
Halcon Resources Corporation HK has Earnings ESP of +200.00% and a Zacks Rank #2. The company is scheduled to release results on Nov 5.
Matador Resources Company MTDR has Earnings ESP of +50.00% and a Zacks Rank #2. The company is scheduled to release results on Nov 4.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment