Oilfield services behemoth, Schlumberger Ltd. SLB is expected to report first-quarter 2017 earnings on Apr 21, before the opening bell.
Last quarter, the company’s earnings of 27 cents per share were in line with the Zacks Consensus Estimate but decreased from 65 cents reported a year ago. Investors should note that the company outpaced the Zacks Consensus Estimate in three of the last four quarters. Let’s see how things are shaping up prior to the announcement.
Factors to Consider
The recent agreement by OPEC and non-OPEC players to cut oil production is expected to bring the much-needed stability to the market as crude prices are set to improve significantly. Schlumberger will likely capitalize on this opportunity as it might get more contracts from drilling players to set up additional oil wells.
Moreover, the Schlumberger-Cameron merger is likely to create technology-driven growth by integrating the reservoir and well technologies of the former with the wellhead and surface equipment, flow control and processing technology of the latter. The results are likely to be reflected in the upcoming quarterly results.
However, shares of Schlumberger underperformed the Zacks categorized Oil & Gas-Field Services industry in the last one year. During the aforesaid period, the company’s shares lost 1.8% compared with 0.5% decline for the broader industry. Also, the company saw the Zacks Consensus Estimate for the first quarter being revised downward in the last 60 days.
Our proven model does not conclusively show that Schlumberger is likely to 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) for this to happen. 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 -7.69%. This is because the Most Accurate estimate is pegged at 24 cents, while the Zacks Consensus Estimate for the company stands at 26 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Schlumberger carries a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s negative Earnings ESP makes surprise prediction difficult.
Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Though an earnings beat looks uncertain for Schlumberger, here are some firms that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat this quarter:
Antero Resources Corporation AR has an Earnings ESP of +100.00% and a Zacks Rank #1. The company is expected to release earnings on Apr 26. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chesapeake Energy Corp. CHK has an Earnings ESP of +15.79% and a Zacks Rank #3. The company is expected to release earnings on May 4.
Rowan Companies plc RDC has an Earnings ESP of +61.54% and a Zacks Rank #3. The company is expected to release earnings on May 2.
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