from thestreet.com re:earnings
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Top Stories: Oil Services Sector Earnings Guide
By Mavis Scanlon
Staff Reporter
4/13/98 3:08 PM ET
A preview guide to oil services sector earnings coming in the next two weeks:
Schlumberger (SLB:NYSE) will report earnings on April 20 -- it traditionally reports before the market opens. Analysts expect a 33% jump in earnings this quarter, to 68 cents per share from 51 cents in 1997. The company's one-penny shortfall in the fourth quarter -- along with a note of caution injected into its earnings release from Chairman and CEO Eaun Baird -- caused a stock selloff in the sector, so investors are sure to pay close attention to any statements from the company.
Increased share dilution may be a concern for all companies in the sector. For SLB, this means "there's a chance there will be a shortfall," says Erik Gustafson, manager of Stein Roe's Growth Stock fund. Even with Schlumberger selling at a premium multiple to the group, Gustafson doesn't see that as a problem for the company. "People go to Schlumberger for the quality of its oilfield service and the quality of its earnings," he says. He expects it to meet consensus estimates.
Halliburton's (HAL:NYSE) merger plans with Dresser Industries (DI:NYSE) gave a big boost to a sagging sector after the companies announced their plans in late February. Consensus estimates call for HAL to report 45 cents per share, up 36% over the year-ago period, when it reports after the market closes "on or about April 23," the company says.
Baker Hughes (BHI:NYSE) will report before the market opens on April 27. The 9 a.m. EDT conference call should prove interesting. Analysts expect a 5-cent increase in Baker's second-quarter earnings, to 45 cents from 40 cents in the year-ago period, which would be a 12.5% jump, and a big slowdown from the 38% jump BHI saw in last year's second quarter. Money managers say BHI "has to get its house in order."
One buy-side analyst says that although the company is growing with the market and has "reasonable" market share, the main issue for Baker is pricing relative to its peers. Baker will face formidable competition in several product lines, including directional drilling, measurement while drilling and drill bits from the powerhouse combination of Halliburton and Dresser.
Prior to the announcement of that combination Baker had a model whereby it would continue to grow and close the distance between it and industry leader Schlumberger, this analyst says. Although Schlumberger may not be in any hurry to make a move to partner up with Baker, he likes the combination, saying it would be well-received by the marketplace. Baker has a solid position on the completion side of the oil and gas business, which would nicely complement Schlumberger's seismic division, which does the preliminary work of finding oil and gas.
Consensus estimates for Weatherford Enterrra (WII:NYSE), which reports before the open April 21, call for a 38% jump in first quarter earnings, to 58 cents per share from 42 cents one year earlier.
Weatherford's merger with Energy Ventures (EVI:NYSE) is expected to be completed by late June; the new company will have a market cap of over $5 billion. Jim Wicklund, at Dain Rauscher Wessels, sees the combination as very strong, as one of EVI's main product lines, drill pipe, will have an automatic distribution channel through Weatherford. He also sees the merger to be slightly dilutive to the new company's earnings into 1999, but with little consequence to the stock. (Management had stated the combination would be dilutive to earnings through 1998.) Wicklund rates WII a buy; Dain Rauscher has not performed underwriting for either firm in the past three years.
Cooper Cameron (RON:NYSE) will report before the market opens April 28; consensus estimates call for a 67% jump in first quarter earnings, to 60 cents from 36 cents one year earlier. Cooper's management has said it has seen no slowdown or spending cuts from its customers. That bodes well for 1998; the backlog for its main business segment, petroleum production equipment, stood at $576 million at year-end.
Dresser's second quarter ends April 30; it expects to report in late May. Consensus estimates call for 50 cents per share, up 19% from one year earlier.
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