Leading oilfield services company, Schlumberger Limited (SLB) is set to report second-quarter 2014 results on Jul 17. Let’s see how things are shaping up prior to the announcement.
In the last quarter, the company’s earnings of $1.21 per share increased approximately 20% year over year from $1.01 and surpassed the Zacks Consensus Estimate of $1.20. The results were boosted by the company’s growing new technology sales and expanding integration activity. This was partially offset by muted results from Russia, China and North America owing to severe winter.
Growth Factors this Past Quarter
Schlumberger expects second-quarter earnings per share (EPS) to be higher year over year. The bullishness on the company stems from higher market share and an improving cost structure. In a smart move, the company targeted state-owned and independent energy companies that are spending significantly to develop shale and other resources around the world, rather than multinational energy companies, most of which are cutting spending.
Schlumberger’s optimism on rising rig count activity will likely lead to increased international spending on exploration, higher production and stepped up activity in the U.S. Gulf of Mexico. The company also expects steady growth in the key regions of Sub-Sahara Africa, Russia, the Middle East, China and Australia.
About two-thirds of Schlumberger’s revenues are generated internationally, marking this the highest ratio among the biggest oilfield service providers, which include Halliburton Company (HAL). Schlumberger’s strength also lies in effective implementation, strong contracts and new technologies.
The oilfield services behemoth believes that strong leverage to the deepwater segment will help it to perform well over the coming years. While the company makes 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.
Earnings Whispers?
Our proven model does not conclusively show that Schlumberger is likely to beat earnings this quarter because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for that to happen. It is not the case here, as you will see below.
Zacks ESP: The Earnings ESP for Schlumberger is 0.00% since the Most Accurate estimate stands at $1.36, in line with the Zacks Consensus Estimate.
Zacks Rank: Schlumberger carries a Zacks Rank #3 (Hold). Though the rank increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
Other Stocks to Consider
Here are a couple of 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.
Eagle Rock Energy Partners LP (EROC), earnings ESP of +50.00% and a Zacks Rank #1 (Strong Buy).
Swift Energy Co. (SFY), earnings ESP of +150.00% and a Zacks Rank #1.
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