SLB’s stock (NYSE: SLB), which provides oil field services including drilling, completion, and production solutions to upstream oil & gas companies in the U.S. and abroad, is scheduled to report its fiscal fourth-quarter results on Friday, January 20. We expect SLB’s stock to trade lower due to revenues and earnings missing expectations marginally in its fourth quarter. The oil market is impacted by several different factors, most of which are particularly unpredictable right now. Despite the healthy demand for physical crude oil, certain economic factors stand to dampen the outlook for oil demand. It should be noted that the current oil pricing environment could have only partially worked its way into SLB’s earnings, given the long planning horizons and contract-driven nature of the services industry. Covid-19 cases are once again rising in China, and the country’s struggle to get its Covid cases under control could impact the demand in the world’s largest crude oil importer. In addition, the continued rising interest rates in the U.S. and the fragile global economy that’s vulnerable to inflation also pose a threat to the oil market.
SLB, formerly known as Schlumberger, plans to focus on creating and scaling new energy systems such as carbon solutions, hydrogen, geothermal and geo-energy, energy storage, and critical minerals.
Our forecast indicates that SLB’s valuation is $54 per share, which is 5.5% lower than the current market price. Look at our interactive dashboard analysis on SLB Earnings Preview: What To Expect in Fiscal Q4? for more details.
(1) Revenues expected to be slightly below consensus estimates
Trefis estimates SLB’s Q4 2022 revenues to be around $7.7 billion, marginally below the consensus estimate. Q3 saw the bulk of its growth coming from ramped-up offshore and international drilling. In Q3, SLB’s revenue grew 28% year-over-year (y-o-y) to $7.5 billion, with all four operating segments registering double-digit growth. International revenue was up 13% sequentially and 26% from a year ago to $5.9 billion, while revenue in North America was flat compared with the prior quarter but up 37% from last year. In the upcoming quarter, we expect the company’s revenues to see a similar momentum in revenues, driven by improved drilling activity and pricing power globally. For 2022, we forecast SLB’s Revenues to be $27.9 billion, up 22% y-o-y.
The rig count figures in the U.S. were almost 28% lower than pre-pandemic levels of 2019 (as of January 17, 2023). This shortage of rigs is expected as the oil industry was brutally over-downsized for several years before the present energy supply crunch. Consequently, we expect that SLB’s revenues in 2022 will still remain below the 2019 pre-pandemic levels.
2) EPS is also likely to marginally miss consensus estimates
SLB’s Q4 2022 earnings per share (EPS) is expected to come in at 66 cents per Trefis analysis, 2 cents below the consensus estimate. In Q3, the world’s largest oilfield services company’s $0.63 per share operating earnings were 75% better than year-ago levels.
(3) Stock price estimate lower than the current market price
Going by our SLB’s Valuation, with an EPS estimate of around $2.14 and a P/E multiple of 25.1x in fiscal 2022, this translates into a price of $54, which is 5.5% lower than the current market price. It should be noted that shares of the company have surged about 54% in the past year, rising sharply alongside much of the energy sector.
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|S&P 500 Return||2%||2%||75%|
|Trefis Multi-Strategy Portfolio||7%||7%||237%|
 Month-to-date and year-to-date as of 1/19/2023
 Cumulative total returns since the end of 2016