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Factors to Know Ahead of Schlumberger's (SLB) Q4 Earnings

Zacks Equity Research

Schlumberger Limited SLB is slated to report fourth-quarter 2019 earnings on Jan 17, 2020, before the opening bell.  

As far as earnings surprises are concerned, the Houston, TX-based company is on a firm footing, as it beat the Zacks Consensus Estimate once and matched the same in three of the last four quarters, with the average positive surprise being 1.9%. This is depicted in the graph below:

Schlumberger Limited Price and EPS Surprise

Schlumberger Limited Price and EPS Surprise

Schlumberger Limited price-eps-surprise | Schlumberger Limited Quote

In the last reported quarter, the company’s earnings of 43 cents per share beat the Zacks Consensus Estimate of 40 cents, courtesy of higher wireline activities in Russia and Australia, along with contributions from drilling operations in the international market.

Investors expect this provider of technical products and services to drillers of oil and gas wells to continue winning ways by not missing earnings estimates this time around as well. However, that might not be the case here, as you will see below. Let’s see how things are shaping up prior to the announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for fourth-quarter earnings has declined from 38 cents to 37 cents in the past 30 days. The figure indicates a rise of 2.8% from the year-ago quarter.

Further, the Zacks Consensus Estimate for revenues of $8.2 billion suggests a 0.1% increase from the prior-year quarter.

Factors to Consider

With U.S. explorers and producers having spent conservatively in 2019 owing to volatile crude prices, Schlumberger is expected to have generated lower revenues from oilfield service operations, since it helps upstream energy players to efficiently set up oil wells. Moreover, declining rig count in North America might have hurt the company’s drilling business. These factors are reflected in the Zacks Consensus Estimate for two of its major business segments.  

The Zacks Consensus Estimate for the Reservoir Characterization segment’s earnings before tax is pegged at $352 million, indicating a decline from $364 million in the prior-year quarter. Moreover, the Zacks Consensus Estimate for the Drilling segment’s earnings before tax is $296 million, implying a decline from $318 million in the prior-year quarter.

However, for the Production unit, the Zacks Consensus Estimate for earnings before tax is pegged at $216 million, suggesting growth from $198 million in the prior-year quarter.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Schlumberger this time around. That is because a stock needs to have both 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.   

Earnings ESP: Earnings ESP represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Schlumberger has an Earnings ESP of -2.03% as the Most Accurate Estimate stands at 36 cents, while the Zacks Consensus Estimate is pegged at 37 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Schlumberger currently carries a Zacks Rank #5 (Strong Sell).

Stocks to Consider

While earnings beat looks uncertain for Schlumberger, here are some companies from the Energy space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Callon Petroleum Company CPE has an Earnings ESP of +7.66% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

Enbridge Inc. ENB has an Earnings ESP of +4.81% and a Zacks Rank of 2.

Ecopetrol S.A. EC has an Earnings ESP of +13.49% and sports a Zacks Rank #1.

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