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Why OFS Stocks Are Seeing Bearish Trends

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Why OFS Stocks Are Seeing Bearish Trends PART 1 OF 7

Why OFS Stocks Are Seeing Bearish Trends

OFS companies versus industry ETF and crude oil price

On July 6, 2017, Schlumberger (SLB), the largest oilfield equipment and services (or OFS) company, was trading at $65.13, down ~22% since the beginning of 2017. Read more on Schlumberger in Market Realist’s Schlumberger: Bumpy Roads Might Be in Its Future.

A 16% drop in crude oil prices in 2017 has started to dent OFS companies’ outlooks. In this article, we’ll discuss large OFS companies’ stock price trends. To know more about energy prices, read US Crude Supplies and OPEC’s Exports Pressure Oil Prices.Why OFS Stocks Are Seeing Bearish Trends

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SLB’s stock price trend, moving averages, and fundamentals

On July 6, 2017, Schlumberger stock was trading at a 6.7% discount to its 50-day moving average (or DMA). It was also trading 17% below its 200-day moving average. SLB’s stock price has been below its long-run MA since March 2017, which indicates long-term weakness in SLB’s stock price. Also, SLB’s stock price moved below the short-run MA in February 2017, indicating short-term headwinds to SLB’s stock price.

Until 1Q17, SLB’s revenue had fallen in the past four quarters. Its net income improved in 1Q17 over 4Q16 though. SLB’s free cash flow has fallen significantly over the past four quarters. Since March 31, 2017, the DJIA-INDEX has risen 3% as of July 6.

HAL’s price, moving averages, and fundamentals

On July 6, 2017, Halliburton’s (HAL) stock price was trading at a ~7% discount to its 50-day moving average. It was also trading 15% below its 200 DMA. HAL’s stock price has been running below its long-run MA since mid-April 2017, indicating long-term weakness. Also, HAL’s stock price moved below the short-run MA in mid-February 2017, which indicates short-term weakness.

HAL’s quarterly revenues improved in 4Q16 and 1Q17, while posting a net loss in 1Q17. Its cash flow, however, has been inconsistent and fell considerably in 1Q17.

NOV’s price, moving averages, and fundamentals

On July 6, 2017, National Oilwell Varco’s (NOV) stock price was trading at a ~4% discount to its 50 DMA. It was also trading 11.5% below its 200 DMA. NOV’s stock price has been running below its long-run MA since mid-April 2017, which indicates long-term weakness in NOV’s stock price. Also, NOV’s stock price moved below the short-run MA in early March, indicating short-term weakness in NOV’s stock price.

Although NOV improved its quarterly revenues and cut net losses in 1Q17, its cash flows from operations weakened in 1Q17. NOV accounts for ~5% of the VanEck Vectors Oil Services ETF (OIH). OIH has fallen 21% since March 31, 2017.

WFT’s price, moving averages, and fundamentals

On July 6, 2017, Weatherford International’s (WFT) stock price was trading at a 24% discount to its 50 DMA. It’s also trading 33% below its 200 DMA. WFT’s stock price has been running below its long-term MA since early May. So, WFT’s stock price exhibits long-term weakness. WFT’s stock price moved below the short-run MA in mid-April 2017, which indicates short-term weakness in WFT’s stock price.

WFT’s cash flows have been negative in three out of the past four quarters and its earnings have continued to deteriorate. However, WFT’s quarterly revenues have held relatively steady in the past three quarters.

Series highlights

In this series, we’ll discuss these large-cap OFS companies’ valuation multiples, what the market indicators suggest, and Wall Street analysts’ recommendations. We’ll start by analyzing their stock price returns in the next part.

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