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Energy demand has seen a significant rebound from the pandemic-driven lows as countries around the world have returned to full capacity. With the astonishing amount of stimulus that governments poured into the economy combined with the supply imbalances and constraints that have plagued the globe, commodity prices are surging to multiyear highs. Oil prices have been no exception, with WTI crude prices rising over 570% since April of 2020 to back above $80/barrel.
Image Source: Zacks Investment Research
It’s no secret that oil-related stocks tend to have a high correlation with the price of crude oil. Higher oil prices are good news for oil company margins and profits. These instances of commodity price gains provide investors with opportunities. And with crude prices continuing to move higher, investors would be wise to consider an allocation to these stocks if they haven’t already done so.
After years of underperformance and underinvestment, last year was the first year in some time in which we saw the energy sector lead all sector returns. Much has been said and written in recent weeks about the Fed tightening and how it will bring down inflation, with energy prices coming down along with it. One thing we know for sure is that price trends tend to continue for longer than most people expect, and it wouldn’t be too shocking to see oil prices continue their rise in the short-term.
Quantitative research studies suggest that approximately half of a stock’s future price appreciation is due to its industry grouping. The Zacks Oil and Gas – Field Services industry group is currently ranked in the top 32% of all 254 industry groups. Because it is ranked in the top half of all industries, we expect it to outperform over the next three to six months.
Image Source: Zacks Investment Research
The Zacks Oil and Gas – Field Services industry group has started out the year strong with a greater than 5% return, while the S&P is currently down more than 2% to kick off January. The three oil services companies we will discuss below are all significantly outperforming both the S&P as well as their collective industry group. By focusing on stocks within the top Zacks Ranked Industries, investors can dramatically improve their trading success.
Halliburton provides a range of products to oil and natural gas companies globally. The company is one of the largest oilfield service providers in the world and offers a variety of equipment, management, engineering and construction services in over 80 countries. Founded in 1919 and based out of Houston, TX, HAL serves the upstream oil and gas industry throughout the reservoir lifecycle.
A Zacks #2 (Buy) stock, Halliburton’s ability to produce strong free cash flow indicates its financial strength. HAL generated a FCF tally of more than $1.1 billion in 2020, with approximately $900 million through the first three quarters of 2021. The company’s plentiful cash flows enable it to pursue a growth-oriented initiative.
HAL has surpassed earnings estimates in each of the past thirteen quarters. Over the past four quarters, the company has delivered an average earnings surprise of +12.49%. HAL stock trades at a reasonable 16.8 forward P/E and is showing relative strength to start out the new year with a greater than 25% gain.
Halliburton Company Price, Consensus and EPS Surprise
2022 EPS estimates have been revised upward in the past 30 days by 1.79%. The Zacks Consensus Estimate now stands at $1.71, translating to 60.15% growth versus last year. HAL is scheduled to report its final set of ’21 quarterly earnings on January 24th.
Schlumberger is the world’s leading provider of technology for reservoir drilling, production, and processing to the oil and gas industry. SLB provides a range of products and services, from exploration through production and integrated pore-to-pipeline solutions that optimize reservoir performance. Founded in 1926 and headquartered in Houston, TX, Schlumberger helps upstream energy players locate oil and gas as well as drill and evaluate hydrocarbon wells.
Operating in over 120 countries, SLB recently announced that there has been an increase in optimism for a larger fuel demand recovery after an initial drop during the pandemic. Given the recent rise in oil prices, the company stated that they believe crude demand to rebound back to pre-pandemic levels by 2023. This anticipated boost in demand should provide a tailwind to oilfield services and activities both domestically and internationally.
SLB has exceeded earnings estimates for the past five years running. The company has posted a trailing four-quarter average earnings surprise of +12.03%. SLB stock has led the charge higher to start out this year with a 26.2% gain.
Schlumberger Limited Price, Consensus and EPS Surprise
What the Zacks Model Reveals
The Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst revisions. This fresh information could potentially be more accurate than what analysts originally thought about company earnings. This proprietary technique has proven to be extremely useful – in fact, when combining a Zacks Rank #3 or better with a positive Earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.
With a Zacks #2 (Buy) ranking and a +2.86% Earnings ESP, another earnings beat may be in store for SLB investors.
Revenue projections for 2022 look favorable with a 15.36% anticipated increase to $26.29 billion. Analysts covering the firm have increased their 2022 EPS estimates by 0.53% in just the past week. The Zacks Consensus Estimate now sits at $1.19, representing growth of 50.72% relative to last year. SLB is due to report earnings this Friday, January 21st.
NexTier Oilfield Solutions Inc.
NexTier Oilfield Solutions is an oilfield service company that provides well completion and production services. NEX serves integrated and independent oil and natural gas exploration companies both domestically and internationally. NexTier Oilfield Solutions was founded in 1973 and is based in Houston, TX.
A Zacks #2 Buy, NEX trades at a realistic 17.39 forward P/E and has produced an earnings beat in six out of the past eight quarters. The company has delivered an average positive surprise of 5.29% over the past four quarters. NEX has recently climbed above some major resistance levels and is already up nearly 70% this month.
NexTier Oilfield Solutions Inc. Price, Consensus and EPS Surprise
Analysts covering NEX have provided fresh EPS estimates for 2022, climbing by 191.67% in the past 60 days. The Zacks Consensus Estimate now stands at $0.35, a growth rate of 159.48% relative to 2020. NEX is slated for its final 2021 quarterly report on February 21st.
These three oil services companies look to continue their strong momentum in the first few trading months of 2022.
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Powerful 'Buy' Signal For 3 Oil Services Stocks
Energy demand has seen a significant rebound from the pandemic-driven lows as countries around the world have returned to full capacity. With the astonishing amount of stimulus that governments poured into the economy combined with the supply imbalances and constraints that have plagued the globe, commodity prices are surging to multiyear highs. Oil prices have been no exception, with WTI crude prices rising over 570% since April of 2020 to back above $80/barrel.
It’s no secret that oil-related stocks tend to have a high correlation with the price of crude oil. Higher oil prices are good news for oil company margins and profits. These instances of commodity price gains provide investors with opportunities. And with crude prices continuing to move higher, investors would be wise to consider an allocation to these stocks if they haven’t already done so.
After years of underperformance and underinvestment, last year was the first year in some time in which we saw the energy sector lead all sector returns. Much has been said and written in recent weeks about the Fed tightening and how it will bring down inflation, with energy prices coming down along with it. One thing we know for sure is that price trends tend to continue for longer than most people expect, and it wouldn’t be too shocking to see oil prices continue their rise in the short-term.
Quantitative research studies suggest that approximately half of a stock’s future price appreciation is due to its industry grouping. The Zacks Oil and Gas – Field Services industry group is currently ranked in the top 32% of all 254 industry groups. Because it is ranked in the top half of all industries, we expect it to outperform over the next three to six months.
The Zacks Oil and Gas – Field Services industry group has started out the year strong with a greater than 5% return, while the S&P is currently down more than 2% to kick off January. The three oil services companies we will discuss below are all significantly outperforming both the S&P as well as their collective industry group. By focusing on stocks within the top Zacks Ranked Industries, investors can dramatically improve their trading success.
Halliburton Co. (HAL - Free Report)
Halliburton provides a range of products to oil and natural gas companies globally. The company is one of the largest oilfield service providers in the world and offers a variety of equipment, management, engineering and construction services in over 80 countries. Founded in 1919 and based out of Houston, TX, HAL serves the upstream oil and gas industry throughout the reservoir lifecycle.
A Zacks #2 (Buy) stock, Halliburton’s ability to produce strong free cash flow indicates its financial strength. HAL generated a FCF tally of more than $1.1 billion in 2020, with approximately $900 million through the first three quarters of 2021. The company’s plentiful cash flows enable it to pursue a growth-oriented initiative.
HAL has surpassed earnings estimates in each of the past thirteen quarters. Over the past four quarters, the company has delivered an average earnings surprise of +12.49%. HAL stock trades at a reasonable 16.8 forward P/E and is showing relative strength to start out the new year with a greater than 25% gain.
Halliburton Company Price, Consensus and EPS Surprise
2022 EPS estimates have been revised upward in the past 30 days by 1.79%. The Zacks Consensus Estimate now stands at $1.71, translating to 60.15% growth versus last year. HAL is scheduled to report its final set of ’21 quarterly earnings on January 24th.
Schlumberger Ltd. (SLB - Free Report)
Schlumberger is the world’s leading provider of technology for reservoir drilling, production, and processing to the oil and gas industry. SLB provides a range of products and services, from exploration through production and integrated pore-to-pipeline solutions that optimize reservoir performance. Founded in 1926 and headquartered in Houston, TX, Schlumberger helps upstream energy players locate oil and gas as well as drill and evaluate hydrocarbon wells.
Operating in over 120 countries, SLB recently announced that there has been an increase in optimism for a larger fuel demand recovery after an initial drop during the pandemic. Given the recent rise in oil prices, the company stated that they believe crude demand to rebound back to pre-pandemic levels by 2023. This anticipated boost in demand should provide a tailwind to oilfield services and activities both domestically and internationally.
SLB has exceeded earnings estimates for the past five years running. The company has posted a trailing four-quarter average earnings surprise of +12.03%. SLB stock has led the charge higher to start out this year with a 26.2% gain.
Schlumberger Limited Price, Consensus and EPS Surprise
What the Zacks Model Reveals
The Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst revisions. This fresh information could potentially be more accurate than what analysts originally thought about company earnings. This proprietary technique has proven to be extremely useful – in fact, when combining a Zacks Rank #3 or better with a positive Earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.
With a Zacks #2 (Buy) ranking and a +2.86% Earnings ESP, another earnings beat may be in store for SLB investors.
Revenue projections for 2022 look favorable with a 15.36% anticipated increase to $26.29 billion. Analysts covering the firm have increased their 2022 EPS estimates by 0.53% in just the past week. The Zacks Consensus Estimate now sits at $1.19, representing growth of 50.72% relative to last year. SLB is due to report earnings this Friday, January 21st.
NexTier Oilfield Solutions Inc.
NexTier Oilfield Solutions is an oilfield service company that provides well completion and production services. NEX serves integrated and independent oil and natural gas exploration companies both domestically and internationally. NexTier Oilfield Solutions was founded in 1973 and is based in Houston, TX.
A Zacks #2 Buy, NEX trades at a realistic 17.39 forward P/E and has produced an earnings beat in six out of the past eight quarters. The company has delivered an average positive surprise of 5.29% over the past four quarters. NEX has recently climbed above some major resistance levels and is already up nearly 70% this month.
NexTier Oilfield Solutions Inc. Price, Consensus and EPS Surprise
Analysts covering NEX have provided fresh EPS estimates for 2022, climbing by 191.67% in the past 60 days. The Zacks Consensus Estimate now stands at $0.35, a growth rate of 159.48% relative to 2020. NEX is slated for its final 2021 quarterly report on February 21st.
These three oil services companies look to continue their strong momentum in the first few trading months of 2022.