SLB’s stock (NYSE: SLB), formerly known as Schlumberger, provides oil field services including drilling, completion, and production solutions to upstream oil & gas companies in the U.S. and abroad. As SLB is set to report its fiscal fourth-quarter results on Friday, January 19, shareholders wonder if it can bounce back from a 7% decline since the start of the year. The company’s international and offshore markets continue to experience a strong resurgence of activity, driven by resilient long-cycle development and capacity expansion projects, while the North American land market faces potential headwinds due to lower-than-expected natural gas prices and capital restraint by private exploration & production operators. These dynamics set the stage for a pivotal earnings report.
Positive Trends for Revenue and Earnings Expectations
International Energy Agency forecasts indicate that global liquid fuel production is expected to increase by 0.6 million barrels/day in 2024, with non-OPEC producers driving growth. This trend is anticipated to spur new drilling activity, offering SLB the potential to leverage its pricing power as both land drilling and offshore activity increase, notably in the Gulf of Mexico. Moreover, with over three-fourths of SLB’s revenue stemming from international markets, the company stands to benefit significantly from the anticipated surge in activity, particularly in the Middle East and Latin America.
Analysts have pegged SLB’s valuation at $55 per share, signifying a 14% upside from the current market price. This optimism is supported by strong performance expectations for the fiscal fourth quarter. The company’s well construction, production systems, and reservoir performance segments are all expected to contribute to revenue growth. In fact, for full-year FY 2023, SLB’s revenues are projected to reach $32.9 billion, reflecting a robust 17% year-over-year increase.
Earnings Per Share (EPS) Expectations
Trefis analysis forecasts SLB’s Q4 2023 revenues to be around $9 billion, slightly ahead of the consensus estimate. This promising outlook is fueled by a strong performance in the international market, as the company recorded its ninth consecutive quarter of double-digit year-over-year growth. With an anticipated earnings per share (EPS) of 86 cents, SLB looks set to surpass the consensus estimate, further bolstering investor confidence.
Stock Price and Market Performance
Considering SLB’s valuation and an EPS estimate of around $3.00, the company’s stock is projected to reach $55, a substantial 14% above the current market price. Subsequently, investors are eager to assess SLB’s performance relative to its peers in the industry. At the same time, they are mindful of the recent negative returns. Despite a 7% decline since the start of the year, differentiated market dynamics mean that SLB performance should be analyzed against broader market trends. Historical performance indicates that SLB Return trails S&P 500 Return, offering valuable context for investors gauging the stock’s potential.
