Analysts’ Light Schedules Reflect Apathy in Oilfield Service Stocks
More free time for analysts usually means a lot less interest in the sector they cover.
No group illustrates this better than oil and gas, especially oilfield service stocks. The Philadelphia Oil Service Sector Index sank 2% Tuesday and has fallen more than 15% this year. Meanwhile, the S&P 500 has risen 25% in 2019.
Piper Jaffray & Co.’s Houston-based team took a trip to New York recently, and was again reminded of investors’ disinterest in the industry. “Not surprisingly, interest in oil service stocks is at a career low, if one’s marketing schedule is an indication of interest,” analysts led by John Daniel wrote in a note this week.
Marketing trips now consist of “a sparse two-day schedule featuring plenty of coffee time between meetings,” the investment bank said. That’s in stark contrast to earlier years that featured “back-to-back meetings along with group lunches and dinners.”
Oilfield service stocks remain out of favor with investors amid lingering concerns about profitability and returns, particularly in the U.S. shale patch, according to Bloomberg Intelligence analyst Scott Levine.
Looking at the broader energy complex, Bank of America highlighted in a recent note that Apple Inc. alone is worth more than the entire S&P 500 Energy index — which includes behemoths like Exxon, Chevron and Conoco.
Even with many dividend yields between 3% and 5%, investors haven’t been eager to buy in to the group’s weakness, and are looking instead for signs of improved business across the sector. “Collectively, the consensus view is that the oil service sector remains un-investable,” Piper said.