Will Global Concerns Hurt Schlumberger (SLB) Q4 Earnings? - Analyst Blog
Leading oilfield services company, Schlumberger Limited (SLB) is set to report fourth-quarter 2014 results on Jan 15, 2015 after the market closes.
In the last reported quarter, the company’s earnings of $1.49 per share increased 15.5% year over year from $1.29. The results were driven by solid growth in the company's North America operations with a strong seasonal rebound on land and significantly higher east coast offshore activity.
Will Schlumberger impress in the upcoming release after combating some serious challenges it witnessed in the three-month period ended Dec 31? Let’s see what factors might have influenced the earnings report this time around.
Q4 Flashback
Schlumberger’s overall picture for the final quarter of 2014 remains closely tied to the persistent fall in crude prices. WTI and Brent witnessed similar declines resulting from an oversupplied market. Moreover, the strength of the dollar against other currencies made oil dearer to importers, thus contributing to the slump.
The company was also perturbed by the mixed fortunes of the main economies such as China, the U.S. and the Eurozone. Looking forward, Schlumberger’s optimism on rising rig count and customer activity will likely lead to its 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 key regions that include Sub-Sahara Africa, Russia, the Middle East, China and Australia.
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 $1.47 from $1.53 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 fourth 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 -1.36%. This is because the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.45 and $1.47, respectively.
Zacks Rank: Schlumberger has a Zacks Rank #5 (Strong Sell). We caution against Sell-rated stocks with 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 these have the right combination of elements to post an earnings beat this quarter.
Spectra Energy Partners, LP (SEP) has Earnings ESP of +7.25% and a Zacks Rank #1.
Delek Logistics Partners, LP (DKL) has Earnings ESP of +1.33% and a Zacks Rank #2.
Tesoro Corporation (TSO) has Earnings ESP of +8.62% and a Zacks Rank #2.
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