For immediate release
Chicago, IL – January 19, 2022 – Today Zacks Investment Ideas Presents: Halliburton Co. HAL, Schlumberger Ltd. SLB and NexTier Oilfield Solutions Inc. NEX.
Strong Buy Signal for 3 Oil Services Stocks
Energy demand has seen a significant rebound from pandemic-induced lows as countries around the world have returned to full capacity. With the astonishing amount of stimulus governments have dumped into the economy, combined with the supply imbalances and constraints that have plagued the world, commodity prices have reached multi-year highs. Oil prices have been no exception, with WTI crude prices rising over 570% since April 2020 back above $80/barrel.
It’s no secret that oil-related stocks tend to have a high correlation with the price of crude oil. Rising oil prices are good news for oil company margins and profits. These examples of commodity price gains provide investors with opportunities. And with crude prices continuing to rise, investors would be wise to consider an allocation to these stocks if they haven’t already.
After years of underperformance and underinvestment, the past year was the first year in some time in which we have seen the energy sector dominate all sector returns. Much has been said and written in recent weeks about Fed tightening and how it will reduce inflation, with energy prices falling. One thing we know for sure is that price trends tend to continue for longer than most people realize, and it wouldn’t be too shocking to see oil prices continue to rise in the short term. term.
Quantitative research studies suggest that about half of a stock’s future price appreciation is due to its industry group. Zacks Oil and Gas – Field Services industry group is currently ranked in the top 32% of 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.
Industry group Zacks Oil and Gas – Field Services started the year strong with a return above 5%, while the S&P is currently down more than 2% to start January. The three oil services companies we will discuss below are all significantly outperforming both the S&P and their collective industry group. By focusing on stocks in the top industries ranked by Zacks, investors can dramatically improve their trading success.
Halliburton supplies a range of products to oil and gas companies around the world. 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 more than 80 countries. Founded in 1919 and based in Houston, TX, HAL serves the upstream oil and gas industry throughout the reservoir lifecycle.
Stock Zacks #2 (Buy), Halliburton’s ability to generate strong free cash flow indicates its financial strength. HAL generated total FCF of more than $1.1 billion in 2020, including approximately $900 million in the first three quarters of 2021. The company’s abundant cash flow enables it to pursue an initiative focused on the growth.
HAL has exceeded earnings estimates in each of the past thirteen quarters. Over the last four quarters, the company has achieved an average surprise profit of +12.49%. HAL stock is trading at a reasonable P/E of 16.8 and showing relative strength to start the new year with a gain of over 25%.
2022 EPS estimates have been revised upwards over the past 30 days by 1.79%. The Zacks consensus estimate now stands at $1.71, translating to growth of 60.15% over last year. HAL is expected to release its final round of 21 quarterly results on January 24and.
Schlumberger is the world’s leading provider of technologies for drilling, producing and processing reservoirs for the oil and gas industry. SLB offers a range of products and services, from exploration to production and integrated pore-pipeline solutions that optimize reservoir performance. Founded in 1926 and based in Houston, TX, Schlumberger helps upstream energy players locate oil and gas as well as drill and appraise hydrocarbon wells.
Operating in more than 120 countries, SLB recently announced that there has been renewed optimism for a stronger recovery in fuel demand after an initial dip during the pandemic. Given the recent rise in oil prices, the company said it believes demand for crude will return to pre-pandemic levels by 2023. This projected increase in demand should provide a tailwind to services. and oilfield activities both domestically and internationally.
SLB has exceeded earnings estimates for the past five consecutive years. The company released a surprise average earnings for the last four quarters of +12.03%. SLB stock led the charge higher to start this year with a 26.2% gain.
What Zacks’ model reveals
The Zacks Earnings ESP (Expected Surprise Prediction) seeks to find earnings surprises by focusing on the most recent analyst revisions. This new information could potentially be more accurate than what analysts originally thought about corporate earnings. This proprietary technique has proven extremely useful – in fact, combining a Zacks No. 3 ranking or higher with a positive earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.
With a Zacks No. 2 ranking (buy) and an earnings ESP of +2.86%, another earnings beat could be in store for SLB investors.
Revenue projections for 2022 look favorable with an expected increase of 15.36% to $26.29 billion. Analysts covering the business have raised their 2022 EPS estimates by 0.53% in the past week alone. The Zacks consensus estimate now sits at $1.19, representing a growth of 50.72% from a year ago. SLB must publish its results this Friday, January 21st.
NextTier Oilfield Solutions Inc.
NexTier Oilfield Solutions is an oilfield services company that provides well completion and production services. NEX serves integrated and independent oil and gas exploration companies, both domestically and internationally. NexTier Oilfield Solutions was founded in 1973 and is based in Houston, TX.
A buy of Zacks #2, NEX is trading at a realistic forward P/E of 17.39 and has produced a beating in earnings in six of the last eight quarters. The company has delivered an average positive surprise of 5.29% over the past four quarters. NEX recently broke through some major resistance levels and is already up nearly 70% this month.
Analysts covering NEX provided new EPS estimates for 2022, rising 191.67% over the past 60 days. The Zacks consensus estimate now stands at $0.35, a growth rate of 159.48% over 2020. NEX is expected to release its latest 2021 quarterly report on February 21.st.
These three oil service companies are looking to continue their strong momentum in the first months of business in 2022.
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