CNBC's Jim Cramer on Wednesday weighed in on oil services stocks after the sector's major players reported earnings, telling investors why he thinks SLB and Halliburton have room to run.
Cramer said he was bullish on these stocks after their earnings showed a strong international business and efficient platforms. Both stocks have seen gains in the sessions since their reports, with Halliburton up 4.33% by Wednesday's close and SLB up 2.48%.
“I think SLB and Halliburton deserve all this upside and more,” Cramer said. “Yes, I think they can continue to go up. Yes, the growth outlook for the oil services industry is better than I thought going into earnings, primarily due to increased activity offshore.”
In its earnings report last week, SLB's main strength was its international business, which the company… He said It has achieved 10 consecutive quarters of double-digit growth. Cramer was also encouraged that SLB raised its dividend by 10%, indicating that management is confident in future success. Although its cash flows weren't as strong as SLB's, Halliburton's were as well mentioned A strong international company and indicated its confidence in overseeing production over the next few years.
But Cramer was somewhat concerned about increased efficiency. He wondered whether these oil services companies would become a “victim of their own efficiency,” as producers would need to buy fewer rigs because each one could produce more oil than in the past. But Halliburton management allayed Kramer's concerns.
“Halliburton has shown how it's getting more and more money from each well as well, so, at worst, it's a wash,” he said. “In addition, while they help producers expand and extend the life of individual wells, they make more money and incur lower costs, resulting in improved profit margins.”
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