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Schlumberger (SLB) to Report Q3 Earnings: What's in Store?

Zacks Equity Research
·4 min read

Schlumberger Limited SLB is slated to report third-quarter 2020 earnings on Oct 16, before the opening bell.

In the last reported quarter, the leading oilfield service firm beat the Zacks Consensus Estimate, thanks to resilience in the company’s international business despite the coronavirus-induced unfavorable business environment. Notably, as far as earnings surprises are concerned, the Houston, TX-based company is on a firm footing as it beat the Zacks Consensus Estimate in the past four quarters, the average surprise being 5.7%. This is depicted in the graph below:

Schlumberger Limited Price and EPS Surprise


Schlumberger Limited Price and EPS Surprise
Schlumberger Limited Price and EPS Surprise

Schlumberger Limited price-eps-surprise | Schlumberger Limited Quote

Trend in Estimate Revision

The Zacks Consensus Estimate of 13 cents per share has seen one upward estimate revision and no downward revisions over the past 30 days. The estimated figure suggests a decline of 69.8% from the prior-year reported number.

Further, the Zacks Consensus Estimate for revenues of $5.4 billion indicates a 36.7% decline from the prior-year quarter.

Factors to Note

As compared to second-quarter 2020, the price of crude oil has improved considerably in the September quarter, thanks to easing lockdown measures to curb the spread of the coronavirus pandemic. However, the commodity’s price in third-quarter 2020 considerably declined year over year owing to coronavirus-dented fuel demand.

Thus, lower oil prices provided little initiative to explorers to produce the commodity. The lack of initiative is reflected in the third-quarter 2020 decline in rig count in both domestic and international oil resources from the year-ago quarter.

Since oil field service providers assist oil explorers to efficiently drill oil wells, lower upstream activities are likely to have hurt Schlumberger. Notably, the Zacks Consensus Estimate for operating income before taxes for the company’s drilling unit is pegged at $164 million, indicating a drop from the year-ago quarter’s $305 million. Moreover, the Zacks Consensus Estimate for operating income before taxes for Schlumberger’s Reservoir Characterization unit is pegged at $205 million, suggesting a decline from the year-ago quarter’s $360 million.

What Does the Zacks Model Say?

Our proven model does not conclusively predict an earnings beat for Schlumbergerthis time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. 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 -4.00% as the Most Accurate Estimate is 12 cents per share and the Zacks Consensus Estimate is 13 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 #3.

Stocks to Consider

Investors can consider the following players from the energy space that have the right combination of elements to post an earnings beat in the to-be-reported quarter:

Cabot Oil & Gas Corporation COG has an Earnings ESP of +10.19% and is a Zacks #2 Ranked player. The company is scheduled to release third-quarter results on Oct 29. You can see the complete list of today’s Zacks #1 Rank stocks here.  

EOG Resources, Inc. EOG has an Earnings ESP of +711.90% and a Zacks Rank of 3. It is scheduled to report third-quarter results on Nov 5.

Diamondback Energy, Inc. FANG has an Earnings ESP of +18.01% and a Zacks Rank #3. The firm is scheduled to release third-quarter earnings on Nov 2.

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