Halliburton (HAL), Schlumberger (SLB) and Baker Hughes (BHI). Three oil services firms with three very different responses to news today.
Bloomberg First up, Halliburton. It reported a profit of 93 cents a share, above forecasts for 89 cents, yet Halliburton’s shares have dropped 1.8% to $49.76. Citigroup’s Robin Shoemaker and Mark Brown explain why:
…the stock is trading lower today largely because the company cited several negative factors that are impacting its Latin America operations in 2014…
The major challenge comes from Brazil, where offshore drilling activity fell in 2013 and is expected to decline further in 2014. Halliburton won a large multi-year drilling services contract from Petrobras (PBR) before offshore activity began to slow. After putting in place the people and infrastructure to execute the contract, [Halliburton] has been very disappointed with the volume of drilling services work that Petrobras has needed under the terms of the contract…
Even with the headwinds from this region, the company expects to perform strongly this year and to achieve double digit earnings growth on the back of improving profitability in North America and strong Eastern Hemisphere results. We expect [Halliburton] shares to recover when the LatAm issues and their impact on the earnings of the company as a whole are better understood.
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Shoemaker and Brown call the selloff “overdone” and recommend being “opportunistic buyers” of Halliburton’s stock.
Baker Hughes, on the other hand, has gained 4% to $56.30 after it reported a profit of 62 cents, above forecasts for 61 cents. That was in line with previous forecasts, but investors must have liked some of the details, including the fact that the oilfield services company sees increased activity ahead in 2014. Cowen’s James Crandell and James Schumm note Baker Hughes positive Latin America numbers:
The $0.01 EPS beat compared with our estimates was largely driven by better than expected results in Latin America and Middle East/Asia partially offset by modestly lower than expected North American earnings…
Revenues in Latin America of $603 million came in above our $585 million estimate and operating income of $71 million beat our $49 million forecast. The company has begun to realize the positive cost benefits of its realignment initiatives.
Schlumberger, which reported last week, is on the move today thanks to an upgrade to Outperform from Neutral at Credit Suisse. Analyst James Wicklund and team explain their optimism:
[Schlumberger] announced a positive 4th quarter, beating the guidance which was revised downward following the quarter’s incident in Iraq. The outlook and tone were clearly positive aided considerably by internal initiatives and efforts of better capital utilization and efficiency across the entire enterprise. It was made increasingly clear that technology continues to matter more and more, that the large cap integrated companies are prospering at the expense of smaller players and that revenue growth will definitely exceed the nominal increase in global capex as infrastructure spend wanes and well-related capex increases. Balanced against all these positives is the reality that 2014 numbers need to be reduced.
Shares of Schlumberger have risen 0.7% to $90.87.
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