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Schlumberger's Earnings: Key Things to Watch

By Dan Caplinger - Apr 18, 2013 at 12:00PM

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Look for the oil services giant to give a hint about the health of the industry.

On Friday, Schlumberger (SLB 3.26%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Oil-services companies have done well during the boom in energy supplies around the world. But the recent drop in oil prices has some analysts concerned about whether current levels of activity will be sustainable in the long run. Let's take an early look at what's been happening with Schlumberger over the past quarter and what we're likely to see in its quarterly report.

Stats on Schlumberger

Analyst EPS Estimate

$0.99

Change From Year-Ago EPS

1%

Revenue Estimate

$10.75 billion

Change From Year-Ago Revenue

1.3%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

Can Schlumberger drill up more profits this quarter?
Analysts haven't been too comfortable in their views on Schlumberger's earnings lately, having cut their estimates for the just-ended quarter by $0.03 per share and chopped $0.14 off their full-year 2013 earnings-per-share consensus. The stock also reflects that uncertainty, having been essentially flat since early January.

Schlumberger has already warned investors that its current quarter won't be as strong as many had hoped, as it said last month that drilling activity in North America was weaker than expected due to fewer rigs being in operation. Much of that slowdown has come from low natural gas prices, though, and as gas has risen off its decade-low levels from last year, the industry could see a rebound. Rival Halliburton (HAL 2.99%) would likely see more benefit than Schlumberger from rising U.S. natural gas prices because of Halliburton's domestic focus and fracking expertise, but favorable trends would likely pull the entire industry up somewhat.

Moreover, Schlumberger's international exposure gives it a huge advantage globally, as it's able to pick and choose projects in areas that are most likely to produce strong results. Especially with natural gas, local price conditions can differ dramatically from region to region, providing valuable diversification for Schlumberger's revenue stream.

But Schlumberger faces a new threat from an unexpected corner, as General Electric (GE 2.27%) has ramped up its presence in the energy infrastructure industry. GE's purchase of Lufkin Industries signals its willingness to become a full-service player for energy customers, and the conglomerate's mammoth size will give it the potential to disrupt even Schlumberger's leadership, especially with GE's name awareness among prospective U.S. customers.

In Schlumberger's earnings report, watch for how the company plans to respond to GE's newest move into the industry. A strong response could help Schlumberger reassert its role as the leader in oilfield services.

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Stocks Mentioned

Schlumberger Limited Stock Quote
Schlumberger Limited
SLB
$48.21 (3.26%) $1.52
General Electric Company Stock Quote
General Electric Company
GE
$78.76 (2.27%) $1.75
Halliburton Company Stock Quote
Halliburton Company
HAL
$41.36 (2.99%) $1.20

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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