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 second-quarter results on Friday, July 21. We expect SLB’s stock to likely see little to no movement due to revenues and earnings coming in line with the market expectations in its second quarter. 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. However, the North American land market could result in an activity plateau in 2023 due to lower-than-expected natural gas prices and capital restraint by private exploration & production operators. While supply cuts from Saudi Arabia and Russia have helped to build a more supportive environment for oil prices currently, any signs of a potential economic slowdown in the U.S. could lead to questions about demand in the short run.
According to the International Energy Agency, global liquid fuel production is expected to increase by 1.2 million barrels/day in 2023, primarily because of growth from non-OPEC producers such as the United States, Norway, Canada, Brazil, and Guyana. 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 in line with the current market price. Look at our interactive dashboard analysis on SLB Earnings Preview: What To Expect in Fiscal Q2? for more details.
(1) Revenues expected to match consensus estimates
Trefis estimates SLB’s Q2 2023 revenues to be around $7.4 billion, in line with the consensus estimate. In Q1, SLB’s adjusted EBITDA jumped 43% year-over-year (y-o-y) to $1.8 billion, and revenues rose 30% y-o-y to $7.7 billion, including a 32% y-o-y jump in revenues from North America to $1.7 billion and a 29% gain in international sales to $6.0 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, 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 come in line with consensus estimates
SLB’s Q2 2023 earnings per share (EPS) is expected to come in at 63 cents per Trefis analysis, matching the consensus estimate. In Q1, the company’s net income jumped to $934 million, or $0.65/share, from $510 million, or $0.36/share, in the year earlier. However, net income was down on a quarter-over-quarter basis, where Q1 2023 net income was $1.06 billion, or $0.74/share.
(3) Stock price estimate in line with 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 in line with the current market price.
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 portfolio that aims for long-term growth? Here’s a value portfolio that’s done much better than the market since 2016.
|S&P 500 Return||2%||19%||103%|
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