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Nabors Industries Ltd. (NBR), Halliburton Company (HAL): Are Oil-Field Service Stocks in for a Rough Quarter?

Oil-field service company Nabors Industries Ltd. (NYSE:NBR) recently reduced its income guidance for the second quarter. The company said it now expects operating income to be in a range of $88 million-$91 million, which is below consensus estimates of $118 million. This sent its stock down by more than 6%.

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Interestingly, its peers had virtually no reaction to its announcement despite the fact the company pointed to intense competition being one of the problems. Nabors Industries Ltd. (NYSE:NBR) also suggested that bad weather negatively affected its results. Overall, the company saw lower sales of capital equipment as well as reduced service and rental activity. Further, it saw weakness particularly in its pressure pumping business in North America.

Investors may wonder if peers like Halliburton Company (NYSE:HAL) and Schlumberger Limited. (NYSE:SLB) were pressured this quarter as well. Both companies have waded through the sluggish North American market by relying on growth overseas. If that trend continues, it should continue to mute some of the weakness Nabors Industries Ltd. (NYSE:NBR) experienced.

Investors won’t have to wait very long: Schlumberger Limited. (NYSE:SLB) reports its earnings on July 19 and rival Baker Hughes Incorporated (NYSE:BHI) reports the same day. By the time Halliburton Company (NYSE:HAL) reports on July 22, investors should already have a pretty good idea how its quarter will turn out. The key bottom-line numbers to watch are earnings expectations, which for Schlumberger are $1.10 per share, while Baker Hughes Incorporated (NYSE:BHI) is expected to earn about $0.65 a share. If those companies can meet or exceed these numbers, then Halliburton Company (NYSE:HAL) investors will have more confidence in its ability to meet or beat its own earnings estimate, which is currently $0.73 per share.

The other area investors need to pay attention to are the outlooks given by each company. Nabors Industries Ltd. (NYSE:NBR)’s gave a very cautious outlook; CEO Tony Petrello stated:

Efficiency gains appear to be consuming operator budgets more rapidly than anticipated and could result in year-end weakness absent favorable mid-year budget revisions. We remain particularly cautious in our outlook for pressure pumping. Although industry activity appears to be increasing slightly, the combination of improving pumping efficiency and increasing competitive intensity tempers our view.

If his statement is as broad-based as it appears, it could mean oil-field service stocks are in for a rough second half. That’s why it will be interesting to see what Schlumberger and Baker Hughes say when both report. If that sentiment isn’t echoed, it likely means Nabors Industries Ltd. (NYSE:NBR)’s problems in the quarter were specific to its business.

While it’s possible Nabors Industries Ltd. (NYSE:NBR)’s issues will be felt by the sector, it likely won’t be a major issue — all three peers have larger, more diversified businesses. That’s likely why the reaction to Nabors’ poor outlook was muted. Not only that, but with oil prices rising lately, exploration and production companies might be spending more money in the second half.

The article Are Oil-Field Service Stocks in for a Rough Quarter? originally appeared on

Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Halliburton.

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