If you're searching for a U.S. sector that's shooting the lights out this earnings season, you need look no further than the oilfield services group. Indeed, the services companies have done so well that even a 35% year-over-year earnings improvement may not elicit much more than a sneer from market minions, as group leader Schlumberger
Schlumberger's shares have given over 13% since the company's earnings were released a couple of weeks ago. Beyond even that big dog, though, were a couple of smaller energy service providers that were hit hard late last week following earnings reports in which they announced strong upward trends.
For instance, Oceaneering International
And based upon increasing demand for and pricing of its services, the company is expected to earn about $3.20 per share this year, up about 40% from 2006. And its growth likely won't stop there: Management's guidance is for an EPS range of $3.50 to $3.80 for 2008.
Flotek, which is dwarfed by most of the large collection of Houston-based services companies, including Halliburton
Indeed, it's all about results versus expectations, and the services group is a tough taskmaster these days. Cameron International
Cameron, which is considerably larger than either Oceaneering or Flotek, has been plying its trade since back in 1833, or before Col. Drake discovered oil in Pennsylvania. Today, the company produces an array of flow equipment products, along with systems and services to oil and gas producers worldwide.
And despite being long in the tooth for the group, Cameron, like most services companies, is very much in a growth mode. Management anticipates earnings to be nearly 56% higher this year than in 2006.
Sealing the pipe
As Flotek learned to its dismay -- with today's lofty expectations for the group -- even a doubling of earnings can result in a company's share price being taken to the woodshed if the doubling is less than the even greater growth the market had been anticipating.
Of course, the flip side of the coin is that, with crude prices continuing to rocket upward, I'm hard pressed to think of another sector with prospects as rosy as those of oilfield services. So this clearly is a group that Fools should watch when valuations appear to justify. Beyond that, my best advice is that, in many cases, the big profits have been made for now. So it clearly is best to maintain a long-term perspective on the services sector.
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