Key Takeaways
- SLB had This fall 2024 earnings of 92 cents per share, which beat the Zacks Consensus Estimate of 90 cents.
- The oilfield service big recorded quarterly revenues of $9.28 billion, which additionally beat estimates of $9.18 billion.
- Nonetheless, over the previous yr SLB inventory has misplaced 12.3% in opposition to the business’s rally of 11%
Final week, SLB SLB reported robust fourth-quarter 2024 results, pushed by earnings development from the Digital & Integration and Manufacturing Programs enterprise segments. Regardless of the optimistic, the oilfield service big’s total enterprise outlook is just not spectacular.
Discover the most recent earnings estimates and surprises on Zacks Earnings Calendar.
Earlier than delving into the underlying causes for the subdued outlook and addressing how buyers ought to place themselves relating to the inventory, let’s first assessment the fourth-quarter outcomes.
SLB’s This fall Earnings Snapshot
On Jan. 17, SLB reported fourth-quarter 2024 earnings of 92 cents per share (excluding fees and credit), which beat the Zacks Consensus Estimate of 90 cents. The underside line elevated from the year-ago quarter’s stage of 86 cents.
The oilfield service big recorded quarterly revenues of $9.28 billion, which beat the Zacks Consensus Estimate of $9.18 billion. The highest line additionally improved from the year-ago quarter’s determine of $8.99 billion.
Together with the quarterly earnings, SLB introduced approvals from the board of administrators to hike quarterly dividends by 3.6%. The corporate has additionally selected an accelerated share repurchase program involving the repurchase of $2.3 billion of its frequent inventory. Notably, the ASR is a part of SLB’s broader plan to return a minimal of $4 billion to shareholders in 2025 by way of dividends and inventory repurchases.
Halliburton Firm HAL and Baker Hughes BKR, two different main gamers within the oilfield providers sector, are but to report fourth-quarter earnings.
Cautious Spending & U.S. Market Weak point Pose Hurdles for SLB
Baker Hughes reported a world rig rely of 926 for the December quarter, a notable decline from 937 rigs within the earlier quarter and 965 rigs within the fourth quarter of 2023. This discount signifies a broader development the place exploration and manufacturing corporations are in all probability implementing cuts of their capital expenditure budgets for drilling actions. This shift is primarily attributable to elevated strain from shareholders, who’re advocating for capital returns over additional investments in exploration and manufacturing.
Picture Supply: Baker Hughes Firm
Decrease drilling actions might diminish demand for providers from main oilfield service supplier SLB within the worldwide market, which contributes considerably to the corporate’s revenues.
The corporate additionally anticipates a downturn in North American upstream exercise attributable to decrease capital investments, enhanced drilling productiveness and a sluggish rebound in pure fuel markets.
Publicity to Russia & Overvaluation Spark Issues for SLB
SLB faces important headwinds in Russia, the place revenues have dwindled to simply 4% of the corporate’s world complete in 2024 from 5% the prior yr. This steep discount underscores the extreme influence of escalating geopolitical tensions and stringent sanctions. In response, SLB has been compelled to implement restrictive voluntary measures, together with the cessation of product and know-how shipments from its world services to Russia. As geopolitical complexities intensify and new U.S. sanctions come into impact, the corporate’s capacity to function within the area stays severely constrained, additional jeopardizing its development prospects on this crucial market.
All these threat components are mirrored in SLB’s value efficiency. Over the previous yr, the inventory has misplaced 12.3% in opposition to the industry’s rally of 11%.
One-Yr Worth Chart
Picture Supply: Zacks Funding Analysis
Regardless of the value decline, SLB nonetheless seems comparatively overvalued, indicating the potential for additional value decreases. The corporate’s present trailing 12-month enterprise worth/earnings earlier than curiosity, tax, depreciation and amortization (EV/EBITDA) ratio is 7.74, which is buying and selling at a premium in comparison with the broader business common of seven.28.
Picture Supply: Zacks Funding Analysis
Time to Get Rid of SLB
With purchasers turning into more and more cautious of their discretionary spending and SLB grappling with substantial challenges in Russia, eliminating this overvalued inventory appears to be a sensible resolution, because the agency’s initiative to return capital to shareholders could not tackle the underlying pressures on its enterprise fundamentals. The inventory at the moment carries a Zacks Rank #5 (Robust Promote).
You possibly can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Schlumberger Limited (SLB) : Free Stock Analysis Report
Halliburton Company (HAL) : Free Stock Analysis Report
Baker Hughes Company (BKR) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
