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What Do Q4 Earnings Say About Oil Service ETFs?

Sanghamitra Saha

A lot has been said about oil price recovery over the last few months. Despite solid U.S. crude production, U.S. crude ETF United States Oil USO and Brent crude United States Brent Oil BNO gained 5.6% and 9.7% in the past six months (as of Jan 17, 2019).

Continued OPEC output cut, Middle-East tensions related to the U.S.-Iran row, a dovish Fed and the decelerating crude output growth in the United States supported the price (read: Good Tidings Await Oil in 2020: 5 Soaring Energy ETFs).

Against this backdrop, a close monitoring of the energy space that deals with the extraction of oil is warranted. Notably, oil service companies currently belong to an unfavorable Zacks industry (placed at the bottom 9% of 250+ industries).

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 – SchlumbergerLtd. SLB and Halliburton Company HAL. Among the duo, Halliburton reported earnings results on Jan 21 while Schlumberger reported on Jan 17.

Schlumberger – the world’s largest oilfield services provider – came up with an impressive Q4. Fourth-quarter 2019 earnings of 39 cents per share (excluding charges and credits) surpass the Zacks Consensus Estimate of 37 cents. The bottom line also increased from 36 cents a year ago.

The oilfield service giant’s total revenues of $8.228 billion beat the Zacks Consensus Estimate of $8.188 billion and improved from the year-ago quarter’s $8.180 billion. Management portrayed a relatively positive 2020 oil market outlook. Schlumberger shares rose 1% on Jan 17 in after-hours trading.

Halliburton – It delivered better-than-expected fourth-quarter earnings as robust international activity offset headwinds in North America. The world's second-largest oilfield services company reported earnings of 32 cents per share, surpassing the Zacks Consensus Estimate of 29 cents. However, the bottom line was 22% lower than the year-ago figure of 41 cents.

Meanwhile, revenues of $5.2 billion were 12.55% lower than the year-ago quarter but topped the Zacks Consensus Estimate of $5.08 billion. North American revenues plunged 30.3% year over year to $2.3 billion. However, revenues from Halliburton’s international operations rose 11.54%. Th company has been witnessing a broad-based, steady recovery in its international business. The shares fell about 0.8% in the key trading session.

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 $668.6 million of assets in 25 holdings and devotes as much as 19.4% of the portfolio weight to SLB, followed by 9.70% 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 (read: ETFs to Gain & Lose From Higher Oil Price).

iShares US Oil Equipment & Services ETF (IEZ)

This ETF invests about $83.2 million of assets in about 30 securities, focusing solely on the energy world. The in-focus SLB takes up the first position here with 21.9% of holdings. HAL takes up the second position with about 19.0% of total assets.

Energy Select Sector SPDR Fund (XLE)

XLE invests $10.8 billion of assets in 28 stocks. The fund puts 4.3% of the portfolio weight in SLB.

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Energy Select Sector SPDR Fund (XLE): ETF Research Reports
 
iShares U.S. Oil Equipment & Services ETF (IEZ): ETF Research Reports
 
United States Oil Fund, LP (USO): ETF Research Reports
 
VanEck Vectors Oil Services ETF (OIH): ETF Research Reports
 
United States Brent Oil Fund LP (BNO): ETF Research Reports
 
Halliburton Company (HAL) : Free Stock Analysis Report
 
Schlumberger Limited (SLB) : Free Stock Analysis Report
 
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