Factors to Know Ahead of Schlumberger's (SLB) Q1 Earnings

Schlumberger Limited SLB is slated to report first-quarter 2020 earnings on Apr 17, 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 twice and matched the same in two of the last four quarters, with the average positive surprise being 3.2%. 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 39 cents per share beat the Zacks Consensus Estimate of 37 cents, courtesy of increase in Surface Systems, Drilling Systems and OneSubsea performances in international markets, along with strong SIS digital software sales.

Let’s see how things have shaped up prior to the announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for first-quarter earnings per share has declined from 28 cents to 25 cents in the past 30 days. The figure indicates a decrease of 16.7% from the year-ago quarter.

Further, the Zacks Consensus Estimate for revenues of $7.6 billion suggests a 3.6% decline from the prior-year quarter.

Factors to Consider

With U.S. explorers and producers having spent conservatively in the first quarter 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.

Oil prices traded in the bearish territory, especially in the last two months of the quarter, in the wake of weak global energy demand owing to the coronavirus outbreak. The lowest price was witnessed in the last month of first-quarter 2020, since OPEC and Russia failed to reach an agreement on oil production cuts amid the pandemic. The weak commodity pricing scenario primarily prompted U.S. drillers to remove rigs from oil and gas resources. This might have hurt the company’s drilling business. The Zacks Consensus Estimate for three of its major business segments also suggests the same.

The Zacks Consensus Estimate for the Drilling segment’s earnings before tax is $235 million, implying a decline from $307 million in the prior-year quarter. Also, for the Production unit, the Zacks Consensus Estimate for earnings before tax is pegged at $194 million, suggesting a decline from $217 million in the prior-year quarter. Moreover, the Zacks Consensus Estimate for the Cameron segment’s earnings before tax is pegged at $98 million, indicating fall from $137 million in the prior-year quarter.

However, the Zacks Consensus Estimate for the Reservoir Characterization segment’s earnings before tax is pegged at $299 million, indicating growth from $293 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 -10.00% as the Most Accurate Estimate stands at 23 cents, while the Zacks Consensus Estimate is pegged at 25 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

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:

Murphy USA Inc. MUSA has an Earnings ESP of +44.49% and is a Zacks #2 Ranked player. The company is scheduled to release first-quarter results before the market opens on Apr 17. You can see the complete list of today’s Zacks #1 Rank stocks here.

Comstock Resources, Inc. CRK has an Earnings ESP of +22.73% and a Zacks Rank of 2. It is scheduled to report first-quarter results on May 6.

EQT Corporation EQT has an Earnings ESP of +42.40% and holds a Zacks Rank #3. It is likely to report first-quarter results soon.

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