Zacks Industry Rank Analysis Highlights: Schlumberger, Halliburton and Baker Hughes

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Sep 22, 2011, 09:30 ET

CHICAGO, Sept. 22, 2011 /PRNewswire/ -- Stocks featured in this week's Zacks Industry Rank analysis include Schlumberger (NYSE: SLB), Halliburton (NYSE: HAL) and Baker Hughes (NYSE: BHI).

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Zacks Industry Rank Analysis is written by Dirk Van Dijk, CFA, Chief Equity Strategist, Zacks.com.

Oil Field Services Shine

While the price of oil is off of its highs earlier this year, it is still running much higher than it was a year ago, and at levels where it is still very profitable for oil companies to go looking for it. While the Western economies have slowed, the emerging powers like India and China continue to see robust growth. They are at the stage of development where growth is very energy-intensive.

China is now the largest Auto market in the world, and virtually every one of the cars sold there represents a net addition to its auto fleet, rather than being a mostly replacement market as is the case in the U.S. and Europe. That means each car sold today will be burning gas for many years to come. Over time, however, the easy oil has been mostly extracted. Oil companies now have to search in more remote places and have to drill much deeper.

Squeezing the last practical drop out of existing fields also becomes more important. In other words, the oil service intensity of oil exploration and production is rising. That provides a favorable long-term backdrop for the Oil Field Service industry.

This is a secular growth industry. When people talk of technology in the stock market, they usually think of computers and chips, but the real meaning of technology is the practical application of science, and in that sense these are some of the highest of high-tech firms.

Zacks Industry Classifications

The Zacks industry classifications are very fine, with 256 different industries tracked. It is not particularly noteworthy if a single small industry shows up doing well; a single firm with good news can propel a one or two firm industry to the top (or bottom) of the charts. It is interesting when you see a cluster of similar industries at the top of the list.

The same holds true for the bottom of the list. The definition of size that matters here is not the total sales or market capitalization but the number of companies in the "industry."

Among the Biggest and Best

The Oil and Gas Service industry is much larger than average, not only in terms of the number of firms (34) but also in the market capitalizations of the firms involved. It is thus worth writing about on its own. It is currently in 23rd place, and improvement of 23 spots as its average Zacks Rank fell to 2.57 from 2.69. Significantly, the largest firms in the industry hold either number one or number two ranks.

There are 35 firms in these industry, of which three (8.6%) hold the enviable Zacks #1 Rank. Twelve more (34.3%) have Zacks #2 Ranks. If the Zacks ranks were random, then one would expect that 5% of the names in an industry would be #1's and 15% would be #2's.

There are three genuine large caps on the lists. Schlumberger (NYSE: SLB) tops the list of Zacks #1 Ranked firms, while Halliburton (NYSE: HAL) and Baker Hughes (NYSE: BHI) top the list of Zacks #2 Ranked firms.

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Contact: Dirk Van Dijk, CFA
Company: Zacks.com
Phone: 312-265-9211
Email: [email protected]
Visit: www.Zacks.com

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