The energy sector has been performing remarkably well this year
on higher oil prices and overseas operations. This trend is
expected to continue as we move towards the end of the year. In
fact, as per the
, the energy sector is poised to rank third in Q3 for earnings,
after only finance and technology (read:
3 Country ETFs to Buy on an Oil Surge
This solid earnings output should be easy to hit too, in particular
after robust Q3 numbers from two energy giants -
Baker Hughes (
- on October 18th. Increased oilfield activity offshore U.S. and
overseas boosted the profits of these companies.
Oil Service Earnings in Focus
Schlumberger, the world's largest oilfield services provider,
reported earnings of $1.24 per share that topped the Zacks
Consensus Estimate by a nickel and improved from the year-ago
quarter as well. Higher offshore drilling activity in North
America, strong demand from the Middle East and Asia, and a
seasonal rebound in Canadian drilling led to the strong
Revenues climbed 11% to record $10.5 billion and were in-line with
our consensus estimate.
Meanwhile, Baker Hughes, the world's third largest oilfield
services provider, surpassed the Zacks Consensus Estimate on both
earnings and revenues thanks to strong performances in the Middle
East/Asia-Pacific and Europe/Africa/Russia Caspian business units.
The company's earnings of 81 cents per share increased 2.5% year
over year and beat our estimate by 3 cents. Revenues rose 8.1% to
$5.79 billion and outpaced our estimate of $5.74 billion.
Following the earnings beat, BHI led the gains in the energy
sector, climbing 7.28% at the close on elevated volume after rising
as much as 8% in early trading hours. The shares of SLB rose 3.8%
in early trading hours but closed a little lower, with a 2.8%
rise, on moderate volume (read:
3 Top Performing Energy ETFs in Focus Now
This solid run was also felt in the ETF world, with energy ETFs
surging. Many of the key funds in this segment have a double-digit
allocation to these two oilfield service providers and gained in
the day's session.
Below, we have highlighted three ETFs with the biggest allocations
to these two energy bellwethers that have seen higher trading and
look to be big movers this week and in the next. Investors should
closely monitor the movement in these funds and could catch the
opportunity from any further surge in stock prices (see:
all the Energy ETFs here
Market Vectors Oil Services ETF (
This is by far the largest and the most popular ETF in the energy
space with AUM of over $1.7 billion and average daily volume of
about 3.5 million shares. The fund provides exposure to the 26 most
liquid firms by tracking the Market Vectors US Listed Oil Services
25 Index. The ETF charges a fee of 35 bps annually.
Schlumberger occupies the top position in the basket with 20.65% of
assets while Baker Hughes takes the fourth spot at nearly 5% after
National Oilwell (
Apart from the U.S. companies, the fund also provides exposure to
Switzerland, Bermuda, Luxemberg, United Kingdom and the Netherlands
Switzerland ETFs: Safest Play in Europe?
The fund gained 2.03% on the day and is up nearly 30% in the
year-to-date time frame. The product has a Zacks ETF Rank of 3 or
'Hold' with a 'High' risk outlook.
iShares U.S. Oil Equipment & Services ETF (
This fund follows the Dow Jones U.S. Select Oil Equipment &
Services Index, holding 50 securities in its basket. The product
has amassed $474.9 million in its asset base and trades in good
volume of more than 89,000 shares per day. The ETF charges 45 bps
in annual fees from investors.
Here too, SLB takes the top spot making up roughly 21.57% of the
assets while holding less than 9.7% of assets. This suggests that
the fund is highly dependent on SLB's performance. BHI occupies the
fourth position at 5.61%.
The fund returned about 32% so far this year and added 2.15% on the
PowerShares Dynamic Oil & Gas Services Fund (
This product offers exposure only to seven energy stocks with BHI
at the top position, allocating 17.04% of total assets. PXJ is an
active choice in the energy space and provides an option to pure
play with upbeat Baker Hughes earnings and its impressive surge in
share price (read:
A Comprehensive Guide to Oil & Gas ETFs
The fund tracks the Dynamic Oil Services Intellidex index, which
evaluates companies on a host of investment criteria including
growth, valuation, timeliness and risk factors. The ETF is less
popular having amassed $120.2 million in its asset base and less
liquid with average daily volume of 45,000 shares a day.
The product has an expense ratio of 0.62% and added 2.01% on the
day. The ETF is up nearly 30% so far this year. The fund currently
has a Zacks ETF Rank of 4 or 'Sell' with a 'High' risk outlook.
The stellar performance by Schlumberger and Baker Hughes last week
signals that the energy sector will continue to give strong
performances in the months ahead. Rising U.S. oil demand, greater
energy conservation and increasing offshore drilling would fuel
Further, with the earnings releases from other energy companies
Exxon Mobil (
pending, it is difficult to conclusively speak on the sector's Q3
performance, though it is clearly off to a good start.
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BAKER-HUGHES (BHI): Free Stock Analysis Report
ISHARS-US OIL E (IEZ): ETF Research Reports
MKT VEC-OIL SVC (OIH): ETF Research Reports
PWRSH-DYN OIL&G (PXJ): ETF Research Reports
SCHLUMBERGER LT (SLB): Free Stock Analysis
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