SLB’s stock (NYSE: SLB), formerly known as Schlumberger, an oil field services major, faced a challenging 2024, with its stock price lagging behind the broader energy sector and underperforming its peers in the process. However, the company’s stock is up 14% since the beginning of this year, compared to only 2% return of the S&P 500 over the same period. Also, SLB’s peer Halliburton stock (NYSE: HAL) is up about 10% over the same period. So what’s happening with SLB stock?
SLB’s stock has been up 6% to nearly $44 (Jan 20) since it reported its fourth-quarter earnings on January 17th. SLB beat both on the top and bottom lines in its fiscal fourth quarter. The company reported adjusted EPS of $0.92 (up 7% year-over-year) on $9.3 billion (up 3% y-o-y) in revenue. The market was anticipating $0.90 and $9.18 billion, respectively. SLB’s quarterly performance was a mixed bag, marked by robust growth in digital and integration segments and hindered by challenges in its Well Construction and Latin American businesses. Sales in North America rebounded in the last quarter of 2024, rising by 4% from Q3 and 7% compared to the same period of 2023. Overall, the company’s full-year 2024 revenue jumped by 10% y-o-y to $36.3 billion, with North American revenue down by 1% to $6.7 billion and International revenue (led by Middle East & Asia and Europe & Africa) rising by 12% to $29.4 billion. The company’s North American revenues represent only around 20% of the total revenue – so the rest of the world’s revenues are critical to the company. Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
It should be noted that SLB’s international revenue increase was supported by strong digital sales and the addition of the Aker subsea business, which was added as part of its OneSubsea joint venture in Q4 2023. The acquired business generated revenue of $1.93 billion during the full year of 2024. Breaking down SLB’s full-year total revenues, Well Construction revenues dipped 1% y-o-y to $13.4 billion. However, this decline was offset by robust growth in other segments, Production Systems revenues surged 24% to $12.1 billion, Reservoir Performance revenues increased 9% to $7.2 billion, and Digital and Integration revenues rose 10% to $4.2 billion.
The increase in SLB stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 40% in 2021, 81% in 2022, -1% in 2023, and -24% in 2024. The Trefis High Quality Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
We forecast SLB’s Revenues to be $38.1 billion for the fiscal year 2024, up 5% y-o-y. Looking at the bottom line, we now forecast EPS to reach $3.56. Given the changes to our revenues and earnings forecast, we have revised our SLB’s Valuation to $48 per share, based on $3.56 expected EPS and a 13.6x P/E multiple for the fiscal year 2025 – almost 11% higher than the current market price. That said, SLB’s leading position, global reach, and strong financials provide a solid prospect for its growth and profitability in the long term.
Although upstream investment growth is expected to remain slow in the near term due to global oversupply, we anticipate that the oil supply imbalance will gradually correct itself. Looking ahead, SLB forecasts a promising outlook for the oil and gas industry. Key regions such as the Middle East, led by Saudi Arabia and the UAE, as well as offshore markets in Brazil, Guyana, Angola, and Norway, are expected to drive investment to record levels beyond 2025. Furthermore, the industry’s long-term investment outlook will be underpinned by steady global economic growth, a heightened focus on energy security, and increasing energy demand fueled by emerging technologies like AI and data centers.
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.
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