A lot has been said about the oil price disaster over the last few days. The concerns flared up the investing world on Apr 20 after May WTI crude futures plunged, lost all value and dropped to below zero for the first time in history. Weak demand, supply glut and most importantly storage crisis resulted in the catastrophy.
Against this backdrop, a close monitoring of the energy space, which deals with oil field services, is warranted. Given the severity of the situation, oil service companies now belong to an unfavorable Zacks industry (placed at the bottom 26% of total 250+ industries in the Zacks universe).
Let’s delve a little deeper into the earnings picture and see how things are shaping up for the space.
In this piece, we have considered two stocks, namely – Schlumberger (NYSE:SLB) Ltd. SLB and Halliburton Company (NYSE:HAL) HAL, which reported earnings results on Apr 20 and Apr 17, respectively.
Schlumberger — the world’s largest oilfield services provider — came up with a mixed Q1. First-quarter 2020 earnings of 25 cents per share (excluding charges and credits) surpassed the Zacks Consensus Estimate by a penny. However, the bottom line fell 17% from 30 cents a year ago.
The oilfield service giant recorded total revenues of $7.46 billion, which missed the Zacks Consensus Estimate of $7.58 billion and decreased 5% from the year-ago quarter’s $7.88 billion. The company cut dividends by 75%. Shares jumped more than 8% on Apr 17 post earnings, as investors rewarded the company for its business restructuring efforts. Schlumberger is also cutting jobs and shutting down facilities to survive the epic energy calamity.
Halliburton delivered better-than-expected first-quarter earnings on Apr 20 before market open. Robust international activity offset headwinds in North America. The world's second-largest oilfield services company reported earnings of 31 cents per share, surpassing the Zacks Consensus Estimate of 25 cents. Moreover, the bottom line was 34.8% higher than the year-ago figure of 23 cents.
Revenues of $5 billion were 12% lower than the year-ago quarter and marginally missed the Zacks Consensus Estimate by $9 million. North American revenues plunged 25% year over year to $2.5 billion. However, revenues from Halliburton’s international operations rose 5% from the year-ago period to $2.6 billion, an area that continues to perform impressively. Shares gained 0.7% in the key trading session. Gains were capped largely by the oil market rout.
Market Impact
Investors might want to know the impact of earnings results on ETFs that are heavily invested in these popular oil service companies. Below we highlight three oil-services ETFs with considerable allocation to SLB and HAL that could be in focus (see all energy ETFs here):
VanEck Vectors Oil Services ETF (OIH)
OIH invests $270.9 million of assets in 25 holdings and devotes as much as 18.1% of the portfolio weight to SLB, followed by 8.82% in HAL. Generally, when one stock accounts for as much as 19% of an ETF's weight, its individual performance decides much of the fund’s price movement. OIH gained 6% in the past two days (as of Apr 20), reflecting the duo’s results. However, the fund slumped 2% on Apr 20, following the oil price rout.
iShares US Oil Equipment & Services ETF (IEZ)
This ETF invests about $37.2 million of assets in about 30 securities, focusing solely on the energy world. The in-focus SLB takes up the first position here with 22.3% of holdings. HAL takes up the second position with about 20.4% of total assets. The fund added 5.6% in the past two days, but lost 1.5% on Apr 20.
Energy Select Sector SPDR Fund (XLE)
XLE invests about $8.58 billion of assets in 27 stocks. The fund puts 3.9% of the portfolio weight in SLB. It added about 7.2% in the past two days but lost 3.1% on Apr 20 itself (read: Oil & ETFs: What Investors Need to Know).
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Schlumberger Limited (SLB): Free Stock Analysis Report
Halliburton Company (HAL): Free Stock Analysis Report
Energy Select Sector SPDR ETF (NYSE:XLE): ETF Research Reports
iShares U.S. Oil Equipment & Services ETF (IEZ): ETF Research Reports
VanEck Vectors Oil Services ETF (OIH): ETF Research Reports
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