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UBS: Does Anyone Really Care About Bad Oil Earnings?

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Baker Hughes Incorporated NYSE:BHI, Halliburton Company NYSE:HAL - UBS: Does Anyone Really Care About Bad Oil Earnings?

Earnings season is a critical time for most companies in the market, but Q1 EPS is likely not particularly important for oil services investors. According to UBS analyst Angie Sedita, it’s no secret that Q1 oil earnings will be terrible, but the investment thesis for oil services stocks is all about the future.

UBS is calling for Q1 earnings to be “challenging” in the oil services space, and she expects things to get even worse in Q2 before bottoming in Q3 of this year.

Sedita believes that the rally in oil services stocks is only 30–40 percent completed at this point, but it may have become overheated in the short-term.

“We view any sell-off in the sector as a more attractive buying opportunity and believe most investors are underweight and still looking to get in,” she explained.

Related Link: Why Wasn't A DOJ Antitrust Lawsuit Bad News For Baker Hughes?

She added that in a $60/bbl oil environment, incremental U.S. oil production in 2017–2018 will come from land, not from expensive deep-water rigs.

UBS maintains Buy ratings on the following stocks:

Disclosure: The author is long Baker Hughes, Schlumberger and Halliburton.

DateFirmActionFromTo
Apr 2016Morgan StanleyMaintainsEqual-weight
Apr 2016JefferiesDowngradesBuyUnderperform
Apr 2016NomuraInitiates Coverage onNeutral

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