S&P Endorses A Pair Of Oil Services ETFs
Those that follow the group know that earnings reports that have trickled in thus far from the major oil services players have been good.Very good, actually, and companies like Schlumberger (NYSE: SLB) and Halliburton (NYSE: HAL), the two largest providers of oilfield services in the world, have been pointing to strength in the North American market.
That means shale and shale means fracking. Those sentiments have been echoed in stellar second-quarter reports from Baker Hughes (NYSE: BHI) and National Oilwell Varco (NYSE: NOV), the world's largest provider of oilfield equipment.
The folks at Standard & Poor's Equity Research have taken note of the positive trends surrounding oil services companies, commenting in a note published today that recently announced results show North America remains the brightest spot for Baker Hughes, Halliburton and Schlumberger. S&P has four-star ratings on that trio. (No rating was issued in the note for NOV.)
S&P is also bullish on two oil services ETFs, the iShares Dow Jones US Oil Equipment & Services Index Fund (NYSE: IEZ) and the PowerShares Dynamic Oil & Gas Services Portfolio (NYSE: PXJ). Both ETFs have more than 80% of their assets parked in oil services names, and “given this emphasis, we believe that ETFs such as IEZ and PXJ merit inclusion in the satellite portion of investors' portfolios for those interested in energy exposure,” S&P analyst Stewart Glickman said in the note.
IEZ garners an “overweight” rating from S&P, the firm's highest overall rating. The 46-stock ETF is heavily devoted to its top-10 holdings as those names account for nearly 65% of the ETF's weight. Schlumberger and Halliburton combine for more than 29% of the ETF's weight.
Still, S&P notes six of the ETF's top-10 holdings are four-star or “buy” rated by the firm and S&P rates IEZ's cost factors “overweight” as well.
As for IEZ, which Benzinga recently highlighted in our “ETF Showdown” segment, S&P gives that ETF a “market weight” rating, but an “overweight” rating based on performance. Home to 30 stocks, PXJ's top-10 holdings account for less than a third of the ETF's total weight with Halliburton, Schlumberger and Baker Hughes combining for just over 15% of the ETF's weight.
Bottom line: S&P sees both ETFs as benefiting from the “growth prospects accruing to Schlumberger, Halliburton and Baker Hughes.”
