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Schlumberger (SLB) Stock Gains on Upbeat Sales Outlook

  • Schlumberger (SLB) beat on earnings and revenue estimates, propelling SLB stock higher on the day.
  • Guidance was strong, while management spoke of a strong second half to the year.
  • If other energy stocks report a quarter like Schlumberger, the energy sector may have more upside even with the dip in oil prices.

 

SLB stock - Schlumberger (SLB) Stock Gains on Upbeat Sales Outlook

Source: Valentin Martynov / Shutterstock.com

Shares of Schlumberger (NYSE:SLB) are up about 4.5% on the day after the company reported earnings. Clearly the rise in energy prices has been a boon for energy companies, as SLB stock is up 17% year-to-date.

Even though energy stocks have struggled lately, earnings did not disappoint. The company reported earnings of 50 cents a share, which came in 10 cents a share ahead of estimates. Beating expectations by 25% is impressive, as is growing the bottom by 66% year over year. Revenue grew 20% year-over-year to $6.77 billion.

Perhaps the most important thing when considering a stock’s earnings report is guidance. Again, Schlumberger didn’t disappoint. The company guided to “at least” $27 billion in sales, which is above the consensus estimate of $25.7 billion. It’s even higher than the highest estimate on Wall Street, which is $25.95 billion. Other sources have the highest estimate at $26.4 billion. Either way, Schlumberger just topped it.

From CEO Olivier Le Peuch: “We expect this higher revenue to result in earnings that exceed our previous expectations, given our ambition to exit the year with adjusted EBITDA margins 200 basis points higher than in the fourth quarter of 2021.”

Further: “We expect our working capital and cash flow generation to significantly improve over the second half of the year.”

Breaking Down SLB Stock

Schlumberger is not the most notorious energy stock out there. That crown belongs to Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), which each make up more than 20% of the Energy Select Sector SPDR ETF (NYSEARCA:XLE). For its part, SLB stock is the seventh-largest holding in the exchange traded fund with a 4% allocation.

Oil prices have suffered a peak-to-trough decline of about 27% from the June high. At current prices, oil is still down more than 23%. This has weighed heavily on energy stocks. As for the XLE ETF, it’s currently down 24% from the June high after suffering a peak-to-trough decline of almost 30%.

However, SLB stock just gave investors an important glimpse into the energy sector. As one of the first major oil companies to report earnings, we’re seeing just how well the sector is operating.

Oil prices have clearly fallen. But how these companies continue to operate going forward — in other words, their guidance — will be an important catalyst to how the stocks trade over the next few weeks and beyond.

The fact that Schlumberger is beating on expectations with strong growth and delivering upbeat guidance bodes well for others. That said, this is just one report out of many over the next few weeks. If other energy companies report a quarter like Schlumberger though, energy stocks may not be done rallying.

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.


Article printed from InvestorPlace Media, https://investorplace.com/2022/07/schlumberger-slb-stock-gains-on-upbeat-sales-outlook/.

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