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Decent Oil Service Earnings Fail to Perk Up ETFs

Oil price worries have been rife this year despite the ongoing OPEC output cut. The prolonged travails of the commodity oil saw a short-lived reversal following the OPEC output cut deal signed late last year and the extension of the same this year. Against this backdrop, a close monitoring of the energy space that deals with the extraction of oil is warranted.

Presently, the Zacks Industry Rank for oil service companies is in the bottom 17%. Thanks to a downbeat industry rank, energy investors should be on high alert this earnings season as everyone is keen on finding out where the space is heading. Let’s delve a little deeper into the earnings picture and see how things are shaping up for the space.

In this piece, we have considered two stocks, namely – Schlumberger Ltd. SLB and Halliburton Company HAL. Among the duo, Halliburton reported earnings results on July 24 before the market opened while Schlumberger reported on July 21 (read: 7 ETF Areas to Hog the Limelight in 2017).

Results in Detail

Halliburton – the second largest oil service company – beat on both lines. Its adjusted income per share from continuing operations (excluding special items) came in at $0.23, above the Zacks Consensus Estimate of $0.19. Continued and effective cost management led to the outperformance. Halliburton posted revenues of $4.957 billion, beating the Zacks Consensus Estimate of $4.856 billion.

Schlumberger – the world’s largest oilfield services provider – came up upbeat Q2 results. Earnings of $0.35 per share (excluding charges and credits) beat the Zacks Consensus Estimate of $0.30 and the year-ago figure of $0.23. Total revenue of $7.462 billion improved from the year-ago level of $7.164 billion but beat the Zacks Consensus Estimate of $7.227 billion.

Market Impact

The space got mixed signals thanks to decent performances by industry bellwethers were outweighed by long-standing oil price worries. We would like to note that in the OPEC and non-OPEC meeting held this week, Saudi Arabia announced its plans to take further action to boost waning oil prices. The Saudi oil minister also noted that the country’s oil exports would be fixed to 6.6 million bpd, which reflects a decline of almost a million bpd from last year’s export level. With this, things might turn positive in the days to come, though we believe it is likely to take time.

Still, investors might want to know the impact on ETFs that are heavily invested in these popular oil service companies. Below we highlight three oil-services ETFs with considerable allocation to SLB and HAL that could be in focus following oil-service earnings (see all energy ETFs here):

iShares US Oil Equipment & Services ETF IEZ

This ETF invests about $195.3 million of assets in 35 securities, focusing solely on the energy world. The in-focus SLB takes up the first position here with 15.87% of holdings. Generally, when one stock accounts for as much as 20% of an ETF's weight, its individual performance decides much of the fund’s price movement. HAL takes up the second position with about 9.89% of total assets (read: Oil Refiner ETF (CRAK): A Star Pick Amid Weak Oil Price).

VanEck Vectors Oil Services ETF OIH

OIH invests $1.0 billion of assets in 26 holdings and devotes as much as 19.54% of the portfolio weight to SLB, followed by 14.70% in HAL.

Energy Select Sector SPDR Fund XLE

XLE invests $15.4 billion of assets in 36 stocks. The fund puts 7.51% of the portfolio weight in SLB, followed by 3.09% in HAL.

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ISHARS-US OIL E (IEZ): ETF Research Reports
 
SPDR-EGY SELS (XLE): ETF Research Reports
 
VANECK-OIL SVC (OIH): ETF Research Reports
 
Schlumberger N.V. (SLB): Free Stock Analysis Report
 
Halliburton Company (HAL): Free Stock Analysis Report
 
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