Schlumberger Is Down By 9%, Here Is Why

Key Insights

  • WTI oil declines below the $100 level as traders fear that China would impose a lockdown in Beijing. 
  • The recent dividend increase failed to provide enough support to Schlumberger stock as traders focused on the dynamics of the oil market. 
  • Trading at 16 forward P/E, Schlumberger stock is not too cheap and would remain sensitive to oil price fluctuations. 

Schlumberger Stock Retreats As WTI Oil Slips Below The $100 Level

Shares of the leading oil services company Schlumberger gained strong downside momentum after WTI oil settled below the $100 level and moved closer to the $95 level.

Oil retreated on worries about a potential lockdown in Beijing, which could have a material impact on demand for oil. Not surprisingly, oil-related stocks declined on this news.

On April 22, Schlumberger released its first-quarter report. The company reported revenue of $5.96 billion and adjusted earnings of $0.34 per share, beating analyst estimates on both earnings and revenue. As the company’s results were strong, Schlumberger increased the quarterly dividend from $0.125 per share to $0.175 per share.

What’s Next For Schlumberger Stock?

Analysts expect that Schlumberger will report earnings of $1.7 per share in the current year and earnings of $2.36 per share in the next year, so the stock is trading at 16 forward P/E.

At current levels, the stock is yielding 1.84%, which is not sufficient enough to attract income-oriented investors at a time when traders expect that the Fed would raise rates aggressively.

It should be noted that analyst estimates have improved in recent months, but the pace of these improvements was modest.  In the current market environment, Schlumberger stock will likely remain sensitive to the developments in the oil markets. In case China is forced to introduce more lockdowns, oil would move lower, which will be bearish for Schlumberger shares.

For a look at all of today’s economic events, check out our economic calendar.

Why Schlumberger Stock Is Up By 9% Today

Key Insights

  • WTI oil moves towards the $130 level as the U.S. is ready to impose a ban on Russian oil. 
  • Energy-related stocks enjoy strong demand amid a global rally in the commodity markets.
  • Schlumberger stock remains reasonably priced and has a decent chance to gain additional upside momentum in the upcoming weeks. 

Schlumberger Stock Gains Ground As WTI Oil Gets Close To The $130 Level

Shares of Schlumberger gained strong upside momentum as WTI oil moved above the $129 level after reports indicated that the U.S. would ban imports of Russian oil.

Schlumberger provides services to the energy industry in more than 100 countries. As a service company, Schlumberger stands to benefit in the longer term as countries will have to invest in new production to find alternatives to Russian oil & gas.

Energy-related stocks have been rallying in recent days as Western companies decreased or stopped purchases of Russian energy, causing the prices to spike. This rally continues as investors prepare for a world where oil costs more than $100 per barrel.

What’s Next For Schlumberger Stock?

Analysts expect that Schlumberger will report earnings of $1.8 per share in the current year and $2.36 per share in the next year, so the stock is trading at less than 20 forward P/E. Analyst estimates have been moving higher in recent weeks, and they will surely get updated to account for the recent developments in the oil markets.

Many funds have tried to move away from oil-related stocks due to the upcoming shift to renewable energy, but the recent events highlighted the importance of energy independence and diversification, so stocks like Schlumberger may enjoy stronger support in the upcoming weeks.

I’d also note that oil-related stocks may benefit from the flow of funds into safe-haven assets as investors try to protect themselves from additional downside in the markets. At less than 20 forward P/E, some traders will note that Schlumberger may be a decent alternative to high-PE tech stocks.

For a look at all of today’s economic events, check out our economic calendar.

Wall Street Week Ahead Earnings: Goldman Sachs, Procter & Gamble, United Airlines, and Netflix in focus

The following is a list of earnings slated for release January 17-21, along with a few previews. A number of big companies will report earnings in the week ahead, including Goldman Sachs and Bank of America, Procter & Gamble, Netflix, and a number of transportation companies. Investors will carefully monitor the latest news on the rapidly spreading Omicron coronavirus variant to see how it affects earnings in 2022.

Earnings Calendar For The Week Of January 17

Monday (January 17)

No major earnings are scheduled for release. The stock market in the U.S. will be closed in observance of Martin Luther King, Jr. Day.

Tuesday (January 18)

IN THE SPOTLIGHT: GOLDMAN SACHS

The New York-based leading global investment bank Goldman Sachs is expected to report its fourth-quarter earnings of $11.89 per share, which represents a year-over-year decline of about 2% from $12.08 per share seen in the same period a year ago.

The world’s leading investment manager would see a decline in revenue of nearly 1% to $11.65 billion from a year ago. It is worth noting that in the last two years, Goldman Sachs has surpassed market consensus expectations for profit and revenue most of the time.

“We expect Goldman Sachs to report mixed results, with revenues outperforming the consensus estimates and earnings missing the expected figure. The investment bank reported better than expected results in the last quarter, with the top-line increasing 26% y-o-y. This was driven by significant growth in the investment banking business, followed by higher global markets and consumer & wealth management revenues,” noted analysts at TREFIS.

“While investment banking grew on the back of growth in mergers &acquisitions (M&A) and equity underwriting deal volumes, global markets benefited from higher equity trading revenues. Similarly, the consumer & wealth management segment gained from an increase in outstanding loan balances. That said, the top-line was partially offset by negative growth in the asset management division, primarily due to lower equity investment revenues. We expect the same trend to continue in the fourth quarter. We estimate Goldman Sachs’ valuation to be around $447 per share which is 14% above the current market price.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 18

TICKER COMPANY EPS FORECAST
BAC Bank of America $0.78
SCHW Charles Schwab $0.83
CNXC Concentrix $2.54
HWC Hancock Whitney $1.33
IBKR Interactive Brokers $0.74
JBHT J.B. Hunt Transport Services $2.0
MBWM Mercantile Bank $0.85
ONB Old National Bancorp $0.38
PNFP Pinnacle Financial Partners $1.56
PNC PNC Financial Services $3.62
PRGS Progress Software $0.62
SBNY Signature Bank $3.92
TFC Truist Financial $1.27
UCBI United Community Banks $0.63

 

Wednesday (January 19)

IN THE SPOTLIGHT: PROCTER & GAMBLE, UNITED AIRLINES

PROCTER & GAMBLE: The world’s largest maker of consumer-packaged goods, is expected to report its fiscal second-quarter earnings of $1.66 per share, which represents year-on-year growth of just over 1% from $1.64 per share seen in the same period a year ago.

The Cincinnati, Ohio-based consumer goods corporation would post revenue growth of over 3% to $20.4 billion from a year ago. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

“We believe strategy changes can sustain Procter & Gamble (PG) LT topline growth in the 4% range. In the US, a strong breadth of performance and share gains give us confidence that market share momentum is sustainable and supports LT topline growth above HPC peers. While near-term pressures from commodity/freight inflation will impact margins, we believe PG has stronger pricing power than peers, particularly with share gains,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

PG trades at ~22.5x CY22e EPS, an HSD% discount to HPC peers CLX, CL and CHD, and looks compelling given our call for higher LT PG growth.”

UNITED AIRLINES: The major U.S. airline company is expected to report a loss for the eight-consecutive time of $-2.12 in the holiday quarter as the aviation service provider continues to be negatively impacted by the ongoing COVID-19 pandemic and travel restrictions.

However, that would represent a year-over-year improvement of about 70% from -$7.0 per share seen in the same period a year ago. The Chicago, Illinois-based airlines would post revenue growth of over 130% to $7.94 billion.

“Despite some headwinds around staffing issues, we expect United Airlines (UAL) to guide to a continued sequential improvement with capacity guided to be down in the 17-18% range in Q1, which incorporates domestic capacity down in the 1% range, while international capacity remains down 27%,” noted Sheila Kahyaoglu, equity analyst at Jefferies.

“Remaining in a Net Loss Position into Q1. We expect a continued sequential decline in CASM-ex to 11.63¢, which reflect a 9% increase vs. 2019 levels, which compares to the 13% increase we expect in Q4. Nonetheless, UAL will remain in a net loss position in Q1, before turning positive in Q2.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 19

TICKER COMPANY EPS FORECAST
AA Alcoa $2.5
ASML ASML Holding $4.3
CFG Citizens Financial Group $1.16
CMA Comerica $1.6
DFS Discover Financial Services $3.48
FAST Fastenal $0.36
FUL H.B. Fuller $1.06
KMI Kinder Morgan $0.27
MS Morgan Stanley $1.83
PACW PacWest Bancorp $1.06
PG Procter & Gamble $1.66
STT State Street $1.93
USB U.S. Bancorp $1.13
UAL United Airlines $-2.12
WTFC Wintrust Financial $1.56

 

Thursday (January 20)

IN THE SPOTLIGHT: NETFLIX

The California-based global internet entertainment service company NetFlix is expected to report its fourth-quarter earnings of $0.82 per share, which represents a year-over-year decline of over 30% from $1.19 per share seen in the same period a year ago.

However, the streaming video pioneer would post revenue growth of over 16% to $7.71 billion. It is worth noting that the company has beaten earnings per share (EPS) estimates just thrice in the last two years.

“We believe share performance is highly dependent on increasing global membership scale. Proven success in the US and initial international markets provides a roadmap to success in emerging markets, and scale should allow Netflix (NFLX) to leverage content investments and drive margins,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“Higher global broadband penetration should increase the Netflix (NFLX) addressable market, driving member growth and providing further opportunity given NFLX’s global presence. Longer-term, we see the ability to drive ARPU growth, particularly given increased original programming traction.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 20

TICKER COMPANY EPS FORECAST
AAL American Airlines $-1.72
CSX CSX $0.42
FITB Fifth Third $0.91
ISRG Intuitive Surgical $1.01
KEY KeyCorp $0.56
MTB M&T Bank $3.24
NTRS Northern Trust $1.82
OZK Bank OZK $0.98
PPBI Pacific Premier Bancorp $0.85
PPG PPG Industries $1.2
RF Regions Financial $0.49
SASR Sandy Spring Bancorp $1.1
SIVB SVB Financial $6.29
TRV Travelers $3.77
UNP Union Pacific $2.66
WBS Webster Financial $1.11

 

Friday (January 21)

TICKER COMPANY EPS FORECAST
ALLY Ally Financial $2.0
FHB First Hawaiian $0.47
HBAN Huntington Bancshares $0.37
INFO IHS Markit $0.71
SLB Schlumberger $0.39

 

Why Schlumberger Stock Is Up By 5% Today

Schlumberger Stock Rallies As WTI Oil Gets Back Above The $70 Level

Shares of Schlumberger gained upside momentum after WTI oil managed to get above the $70 level amid supply concerns in the U.S. Other oil-related stocks are among top gainers in S&P 500 today.

It should be noted that investors did not rush to buy oil-related stocks before WTI oil managed to get back above the $70 level. It looks that stock traders were a bit skeptical on sector’s performance due to worries about the spread of the Delta variant of coronavirus, but now they are finally ready to buy oil-related stocks.

Not surprisingly, shares of industry leaders like Schlumberger benefit from traders’ interest in the segment. The stock is down by roughly 25% from its yearly peak that was reached at the beginning of June, so it may also attract value-oriented investors.

What’s Next For Schlumberger Stock?

Analysts expect that Schlumberger will report earnings of $1.26 per share in the current year and $1.77 per share in the next year, so the stock is trading at less than 16 forward P/E which looks cheap in the current market environment.

It should be noted that investors and traders have recently become more cautious when dealing with oil-related stocks due to coronavirus-related risks and the general shift towards renewable energy.

However, oil remains in high demand, and OPEC has just reiterated its forecast that world oil demand will grow by 6 million barrels per day (bpd) in 2021. In 2022, oil demand is projected to grow by 4.2 million bpd. This scenario looks bullish for oil services firms like Schlumberger which benefit from robust oil prices through higher demand and robust pricing for their services.

At current valuation levels, Schlumberger stock may attract value-oriented investors and opportunistic traders who may want to shift some funds from high-growth stocks as the market continues to pull back from historic highs.

For a look at all of today’s economic events, check out our economic calendar.

Schlumberger Tops Q2 Earnings Estimates; Target Price $35

Schlumberger, a technology company that partners with customers to access energy, reported better-than-expected earnings in the second and issued an optimistic outlook for this year as higher oil prices boosted the company’s demand.

The Houston-based company reported quarterly earnings of 30 cents per share, comfortably above the analysts’ expectations of 26 cents. Meanwhile, revenues of $ $5.63 billion topped estimates by $ 5.51 billion.

“Absent any further setback in the recovery, we continue to see our international revenue growing in the second half of 2021 by double-digits when compared to the second half of last year. This translates into full-year 2021 international revenue growth, setting the stage for a strong baseline as we move into 2022 and beyond,” said Schlumberger CEO Olivier Le Peuch.

At the time of writing, Schlumberger shares traded 0.25% higher at $28.05 on Friday. The stock has surged over 28% so far this year.

Analyst Comments

“Wider beat than peers with strong FCF. No real change to outlook except to say the potential for further upside to financial targets where Schlumberger (SLB) has already reached the high end of the annual target for 250-300bps of EBITDA mgn increase. No mention of the “supercycle” used in recent presentations. We wonder how much oil price helped APS, which is said to have contributed to the D&I strength,” noted Marc Bianchi, equity analyst at Cowen.

Schlumberger Stock Price Forecast

Eleven analysts who offered stock ratings for Schlumberger in the last three months forecast the average price in 12 months of $35.36 with a high forecast of $40.00 and a low forecast of $32.00.

The average price target represents a 26.92% change from the last price of $27.86. All of those 11 analysts rated “Buy”, none rated “Hold” or “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $40 with a high of $60 under a bull scenario and $20 under the worst-case scenario. The firm gave an “Overweight” rating on an oilfield services company’s stock.

“Portfolio restructuring masked by downturn: Schlumberger (SLB) has executed a major organizational realignment, which we think has been underappreciated by the market. Defensible market position in the right businesses: We continue to view SLB as the premier OFS franchise, which is now on the right track to value creation. Its high-end businesses have the greatest potential for returns improvement in the coming cycle, in our view,” noted Connor Lynagh, equity analyst at Morgan Stanley.

“Digital & New Energies drive differentiated long-term growth: SLB has developed meaningful partnerships and invested organically in technology to prepare it for two major secular growth trends in the energy industry, which should help address “terminal value” risk.”

Several other analysts have also updated their stock outlook. BofA Global Research raised the price objective to $43 from $42. Citigroup lifted the price target to $40 from $35. JPMorgan upped the target price to $28 from $23. Simmons Energy increased the target price to $29 from $27.5. Stifel raised the target price to $37 from $33.

Check out FX Empire’s earnings calendar

Today’s Market Wrap Up and a Glimpse Into Friday

Stocks managed to move modestly higher with all three major indices extending recent gains. The S&P 500, Dow Jones Industrial Average and Nasdaq all finished the day with fractional gains. Tech stocks Amazon and Facebook were each up by more than 1% and helped fuel the Nasdaq higher.

At this rate, stocks are on track for weekly gains after a bumpy start on Monday. Weaker than expected jobless claims data weighed on sentiment early on but it wasn’t enough to hold stocks down.

 

Investors have the Delta variant in the back of their minds, but they are feeling emboldened by the strong profits being reported by corporate America.

Stocks to Watch

Domino’s Pizza was one of the biggest winners of the day. The food-delivery chain saw its shares soar by 15% to a fresh all-time high. Domino’s Q2 results exceeded analyst expectations on the top and bottom lines.

The company has enhanced its menu with new items that are resonating with customers, especially as consumers spend more time at home. Domino’s plans to keep the momentum going with a USD 1 billion share buyback program.

The semiconductor sector stayed under pressure all day and the selling isn’t over. Intel is down 1.5% in after-hours trading after the company reported earnings. Investors fled on the heels of Intel’s weak Q3 sales outlook amid heightened competition in the space. Meanwhile, Texas Instruments shaved 5% off its value today due to a similarly weak sales forecast.

Twitter shares are up 5% in after-hours trading after Jack Dorsey’s company reported better than anticipated Q2 results. Among the surprises was Twitter’s revenue of USD 1.19 billion, up 74% YoY. Twitter grew the number of monetizable daily active users 11% YoY to 206 million.

Look Ahead

Dow stocks American Express and Honeywell are on tap to report their quarterly earnings on Friday, as is oil company Schlumberger. Shares of Schlumberger are trading 1% higher in extended-hours ahead of the company’s earnings results, which are expected before the opening bell on Wall Street.

The oil price has been volatile of late and USD 100 oil is looking more and more like a long shot. Barclays analysts say that while USD 100 oil isn’t off the table, it would be a stretch. Instead, they are predicting Brent oil to hover at an average of USD 69 per barrel and WTI at USD 67.

Schlumberger Shares Gain as Earnings Top Estimates

Shares in Schlumberger Limited (SLB) bucked broader weakness in the energy sector Friday, gaining nearly 1% after the oilfield services provider delivered a better-than-expected fourth-quarter report.

The Houston-based company reported quarterly earnings of 22 cents per share, comfortably above the 17 cent figure analysts had expected. Meanwhile, revenues of $5.5 billion topped estimates by $300 million. Notably, sequential sales rose across all four of the company’s business divisions during the period, indicating recovering economic activity. On a year-over-year (YoY) basis, top-and bottom-line growth declined 33% and 44%, respectively. Management credited increasing contributions from digital solutions and growing multiclient seismic license sales for the encouraging results.

Cash flow also improved during the quarter, coming in at $554 million despite shelling out $144 million in severance payments. Moreover, the company sees the trend continuing this year. “We are confident in our ability to further improve cash flow generation in 2021, which will allow for debt reduction,” CEO Olivier Le Peuch told investors during the earnings call, per the company’s website.

Through Friday’s close, Schlumberger shares have a market capitalization nearing $34 billion, offer a 2.05% dividend yield, and trade 33% lower over the past 12 months. However, since the start of the year, the stock has gained almost 12%. From a valuation standpoint, the shares have a forward-earnings multiple of 25.7 times, 25% below their five-year average multiple of 34.5 times.

Wall Street View

Citigroup analyst Scott Gruber remains bullish on the stock. “Schlumberger remains our top pick in oilfield services given their leverage to recovery abroad, margin expansion prospects, and free cash flow generative business model,” he wrote in a client note cited by Barron’s.

Other sell-side firms overwhelmingly share Gruber’s view. The stock receives 21 ‘Buy’ ratings, 2 ‘Overweight’ ratings, and 8 ‘Hold’ ratings. Just one analyst currently recommends selling the shares. Twelve-month price targets range widely from a Street-high $37 to a low of $17, with the median sitting at $27.

Technical Outlook and Trading Tactics

Schlumberger shares initially sold off after releasing results but staged an impressive intraday turnaround to complete a piercing line bullish reversal pattern. As added confluence, the bounce occurred at the $24 level, where price finds crucial support from the June and December swing highs. Furthermore, the 50-day simple moving average (SMA) crossed back above the 200-day SMA in early December to form a “golden cross” – a technical signal often marking the start of a new uptrend.

Active traders who enter here should consider placing a stop-loss order slightly beneath Friday’s low at $23.45 and target a move up to longer-term resistance at $31.

For a look at today’s earnings schedule, check out our earnings calendar.