SLB Stock To Likely Trade Higher Post Q1

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SLB’s stock (NYSE: SLB), formerly known as Schlumberger, 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 first-quarter results on Friday, April 21. We expect SLB’s stock to trade higher due to revenues and earnings beating expectations marginally in its first quarter. We believe the macro backdrop that underpins a strong multiyear upcycle for energy remains very compelling in both oil and gas and in low-carbon energy resources. The growing tight supplies due to geopolitical uncertainty and the soaring demand from the reopening of China’s economy will likely bode well for energy prices in 2023. Multiple tailwinds remain in place for 2023, and the activity outlook abroad remains robust, especially in the Middle East where SLB cited the continuation of record investment by national oil companies for multiple years.

According to the International Energy Agency, even with the prospect of a recession in some markets, demand is expected to grow by 2 million barrels per day this year to a record 101.9 million barrels per day. Because these market dynamics will spur new drilling activity, SLB should likely be able to flex its pricing power as both land drilling and offshore activity increase, particularly in the Gulf of Mexico, where the services company has a significant presence. The company is also forecasting more activity and spending at the hole drilled to aid in the exploration and recovery of oil and gas, with most new activity coming from the Middle East and Latin America. That suits it just fine as more than three-fourths of the company’s revenue comes from international markets.

Our forecast indicates that SLB’s valuation is $57 per share, which is 9% higher than the current market price. Look at our interactive dashboard analysis on SLB Earnings Preview: What To Expect in Fiscal Q1? for more details.

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(1) Revenues expected to be slightly above consensus estimates

Trefis estimates SLB’s Q1 2023 revenues to be around $7.6 billion, marginally above the consensus estimate. In Q4, SLB’s adjusted EBITDA jumped 39% year-over-year (y-o-y), and revenues rose 27% y-o-y to $7.88 billion, including a 27% y-o-y jump in revenues from North America to $1.63 billion and a 26% gain in international sales to $6.19 billion. It should be noted that the Middle East/Asia and Europe/Africa regions are critical to the company as North American revenues represent only around 21% of the total revenue. 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 2023, we forecast SLB’s Revenues to be $32.6 billion, up 16% y-o-y.

2) EPS is also likely to marginally beat consensus estimates

SLB’s Q1 2023  earnings per share (EPS) is expected to come in at 62 cents per Trefis analysis, 2 cents above the consensus estimate. The company’s Q4 GAAP net income rose to $1.07 billion, or $0.74/share, from $601 million, or $0.42/share, in the prior-year period.

(3) Stock price estimate higher than the current market price

Going by our SLB’s Valuation, with an EPS estimate of around $3.03 and a P/E multiple of 18.8x in fiscal 2023, this translates into a price of $57, which is almost 9% higher than the current market price. It should be noted that shares of the company have surged about 23% in the last twelve months, rising alongside much of the energy sector.

It is helpful to see how its peers stack up. SLB Peers shows how SLB’s stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Apr 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 SLB Return 6% -2% -38%
 S&P 500 Return 1% 8% 86%
 Trefis Multi-Strategy Portfolio 2% 10% 247%

[1] Month-to-date and year-to-date as of 4/19/2023
[2] Cumulative total returns since the end of 2016

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