Oil services leader Schlumberger (SLB) will report its first quarter financial results on Friday, April 21st. The report comes ahead of releases from other sector heavies, including Halliburton (HAL) on April 24th and Baker Hughes (BHI) on April 25th. The market will be closely watching these companies’ performance for an early indication of how the oil sector in general is shaping up in 2017.

Improving financial results for service providers could indicate a healthier environment for oil producers, who report financial results later this month and in early May. This is because analysts view the Contract Drilling Service (CDS) and Oil Field Service (OFS) sectors as the front line of the oil industry. As the business cycle oscillates, fortunes change most rapidly in this part of the value chain. When times are good, contract rates are renegotiated higher and utilization rates rise. When times are bad, the pace of cutbacks and layoffs can be brutal. (See also, First Quarter Analysis: Winners and Losers in the Energy Sector.)

Consensus Expectations

Wall Street analysts are expecting a relatively muted set of earnings results from the big three oil field service companies. Schlumberger is expected to perform best with 1Q earnings per share (EPS) of $0.27 per share, compared to just $0.04 per share for Halliburton and another quarterly loss of $0.16 per share for Baker Hughes. Most surprising are expectations for Schlumberger to do worse in 1Q17 compared to 1Q16, when EPS was $0.40 per share. Halliburton and Baker Hughes, in contrast, are expected to show significant improvement compared to 1Q16 when each had a quarterly loss of $2.81 per share and $2.22 per share respectively following the sharp fall of in oil prices.

Schlumberger is still expected to come out on top when it comes to revenues, EBITDA and margins, despite the anticipated weak EPS performance. With expected revenue approaching $7 billion and EBITDA of $1.6 billion, the company is also the most profitable among peers with an expected 1Q profit margin of 22.3%, which compares quite favorably versus 13.7% for Halliburton and just 11% for Baker Hughes in the quarter.

Strong Consensus, Despite Weak Performance

Analysts’ consensus remains optimistic despite a relatively lackluster share price performance for the oil field service sector year-to-date judging by the iShares ETF performance. For example, the iShares US Oil Equipment & Services ETF (IEZ) delivered a total return of -10.12% so far this year and is lagging behind the iShares US Oil & Gas Exploration and Production ETF (IEO) with a -8% total return in 2017. Improved forward guidance in the 1Q financial results could turn this around.

Halliburton has 39 analysts covering the stock and 36 currently have a buy recommendation with an average price target of $63.20/share, or 31% additional upside from Friday’s closing price. Schlumberger has 38 analysts covering the stock and 32 have a buy recommendation. The average price target is $96.20/share, or 23% upside from Friday’s closing price of $78.15/share. Finally Baker Hughes has 32 analysts with 19 buy recommendations. The average price target is $69.80/share or 17% upside potential from last Friday’s closing price.

Earnings Calendar

Other energy names we will be following closely this season include:


1Q Earnings Release Date

Newfield Exploration (NFX)

April 25th

Hess Corp (HES)

April 26th

ExxonMobil Corp (XOM)

April 27th

ConocoPhillips (COP)

April 27th

Occidental Petroleum (OXY)

April 27th

Chevron Corp. (CVX)

April 28th

Apache Corp (APA)

May 2nd

Devon Energy Corp (DVN)

May 3rd

Pioneer Natural Resources (PXD)

May 3rd

Chesapeake Energy (CHK)

May 3rd

Marathon Oil Corp (MRO)

May 9th

Anadarko Petroleum (APC)

May 11th

Disclaimer: Gary Ashton is an oil and gas financial consultant who writes for Investopedia. The observations he makes are his own and are not intended as investment advice. Gary does not own any stocks or ETFs mentioned.

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