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Schlumberger (SLB): What’s in Store this Earnings Season?


Schlumberger Limited SLB is set to report third-quarter 2016 results on Oct 20, after the closing bell.

Last quarter, Schlumberger posted a positive earnings surprise of 4.55%. Moreover, the company posted an average positive earnings surprise of 1.98% over the last four quarters. Let’s see how things are shaping up for this announcement.

Factors to Consider this Quarter

Schlumberger is the world's largest oilfield services company. Despite a difficult operating environment owing to oil price weakness, Schlumberger’s financial strength and technological leadership have supported its excellent earnings track record.

Moreover, oil prices have significantly recovered from the mid-February lows. This has enabled exploration and production companies to engage in more upstream operations. This is evidenced by the substantial increase in the U.S. rig count in recent times.

In details, Baker Hughes Inc. BHI – the company’s data issued since 1944 is as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry – recently declared the rig count for Sep 2016. In the U.S., the total number of rigs increased from the Aug 2016 count owing to a rise in the number of land rigs. This represents the fourth consecutive increase in the U.S. monthly rig count. The increase in drilling operations will translate into more work for oilfield services firms like Schlumberger as it helps exploration and production companies in efficiently setting up the oil and gas wells.

However, Schlumberger’s North American business – where the profitability has weakened due to persistently low prices – might hurt the company’s quarterly results to some extent.

SCHLUMBERGER LT Price and EPS Surprise


Earnings Whispers

Our proven model does not conclusively show that Schlumberger will beat estimates this quarter. 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) to be able to beat estimates. That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 22 cents.

Zacks Rank. Schlumberger carries a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies that have the right combination of elements to post an earnings beat this quarter:

CONE Midstream Partners LP CNNX has an Earnings ESP of +2.7% and a Zacks Rank #1. The partnership is likely to release earnings on Nov 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

Antero Midstream Partners LP AM has an Earnings ESP of +2.94% and a Zacks Rank #2. The company is likely to release earnings on Oct 26.

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