Down 7% Already This Year, Will SLB Stock Recoup These Losses After Q4 Results?

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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 fourth-quarter results on Friday, January 19. We expect SLB’s stock to likely trade higher with revenues and earnings coming in ahead of market expectations in its fourth 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 the near term 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 0.6 million barrels/day in 2024, 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 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 $55 per share, which is 14% higher than the current market price. Look at our interactive dashboard analysis on SLB Earnings Preview: What To Expect in Fiscal Q4? for more details.

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(1) Revenues expected to beat consensus estimates marginally

Trefis estimates SLB’s Q4 2023 revenues to be around $9 billion, slightly ahead of the consensus estimate. grew 11% y-o-y to $8.31 billion in Q3, as International revenue jumped 12% y-o-y to $6.61 billion, and North American revenue rose 6% y-o-y to $1.64 billion, with reduced drilling activity in the U.S. and the Gulf of Mexico. By geography, SLB’s International revenue growth of 5%, led by the Middle East and Asia (8% increase) was partially offset by a 6% decrease in North America. 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 20% of the total revenue. The basic principle here is that the company generates revenues by increasing drilling contracts and services. By segment, Well Construction revenues rose 11% y-o-y to $3.4 billion, Production Systems revenues gained 10% y-o-y to $2.4 billion, and Reservoir Performance revenues jumped 15% y-o-y to $1.7 billion. For full-year FY 2023, we forecast SLB’s Revenues to be $32.9 billion, up 17% y-o-y.

2) EPS is also likely to come ahead of consensus estimates

SLB’s Q4 2023 earnings per share (EPS) is expected to come in at 86 cents per Trefis analysis, marginally beating the consensus estimate. SLB Q3 2023 net income rose to $1.12 billion, or $0.78 per share, from $907 million, or $0.63 per share, in the year-earlier quarter, driven by sustained growth in the international markets, where the company

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

Going by our SLB’s Valuation, with an EPS estimate of around $3.00 and a P/E multiple of 18.3x in fiscal 2023, this translates into a price of $55, which is almost 14% higher than 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.

Returns Jan 2024
MTD [1]
Since start
of 2023 [1]
2017-24
Total [2]
 SLB Return -7% -10% -42%
 S&P 500 Return 0% 24% 113%
 Trefis Reinforced Value Portfolio -2% 35% 594%

[1] Returns as of 1/17/2024
[2] Cumulative total returns since the end of 2016

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