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.