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Schlumberger (SLB) Up 32.3% YTD: More Growth on the Horizon?
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Schlumberger Limited’s (SLB - Free Report) stock has surged 32.3% in the year-to-date period, outperforming the 12.6% rise of the industry. Based in Houston, TX, Schlumberger — with a market cap of $38 billion — is a leading oilfield services company, providing a range of services to oil and gas explorers as well as producers across the world.
Can It Retain Momentum?
The answer is yes and before we get into the details, let us show you how its estimates for 2021 stand. The Zacks Consensus Estimate for 2021 earnings per share stands at $1.25, signaling a massive increase from last year’s figure of 68 cents. The consensus estimate for 2021 revenues is pegged at $5.9 billion, indicating a rise from $5.3 billion in 2020.
The company beat earnings estimates in all the last four quarters, with an average of 17.8%.
The company’s greater reliance on the lucrative international market is praiseworthy. Being the leading provider of technologies for complex oilfield projects, Schlumberger is better positioned than most peers to take up new offshore projects in shallow water basins outside North America. The company expects international revenues to witness double-digit growth in second-half 2021. Adjusted EBITDA margin for 2021 is expected within 20.8-21.3%, signaling a rise from 18.3% in 2020. The free cash flow margin is likely to be more than 10% this year, indicating a significant jump from 6% recorded in 2020.
The company believes that despite adverse impacts on economic growth due to the coronavirus pandemic, international oilfield service activities will continue their growth momentum. Rising rig count, capital spending trends and customer feedbacks have been supporting its view. Its long-term deals with state-run companies and integrated firms are major positives. Additionally, its disciplined capital spending will likely benefit shareholders over the long term.
The company also focuses on improving its technology with changing market demand. Its decarbonization technology and customized digital integration are likely to position it to outperform peers. The company’s drive toward sustainability is appreciable. It is, similar to most major companies in the energy spectrum, targeting net-zero greenhouse gas emissions by 2050. The leading oilfield service player is planning on a 30% cut in Scopes 1 and 2 emissions by as early as 2025. The company expects to reach the short-term target ahead of schedule.
By 2030, Schlumberger is eying to cut Scopes 1 and 2 emissions by 50%. By this time frame, it is also planning to reduce Scope 3 emissions by 30%. Schlumberger boasts of becoming the first company in the energy service industry to add Scope 3 emissions ambition in the net-zero emission target. Thus, by providing technology to lower customer emissions, it will be better placed to meet future energy demand by addressing climate change.
Risks
There are a few factors that are holding back the stock from reaching complete potential. The oilfield service firm is expecting business growth from U.S. shale plays to remain slow since upstream energy players are allocating lower capital to exploration and production activities. Even though energy demand is expected to rise in the coming days, upstream companies are likely to focus on shareholder return instead of ramping up production. This, in turn, can hurt demand for Schlumberger's services. Nevertheless, we believe that its systematic and strategic plan of action will drive long-term growth.
Other Stocks to Consider
Other top-ranked stocks from the energy space include RPC, Inc. (RES - Free Report) , Cheniere Energy, Inc. (LNG - Free Report) and Kinder Morgan, Inc. (KMI - Free Report) , each carrying a Zacks Rank #2.
RPC’s bottom line for 2021 is expected to surge 88.9% year over year.
The Zacks Consensus Estimate for Cheniere Energy’s bottom line for 2021 is pegged at $2.98 per share, indicating a massive improvement from the year-ago loss of 34 cents.
Kinder Morgan’s bottom line for 2021 is expected to rise 47.7% year over year.
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Schlumberger (SLB) Up 32.3% YTD: More Growth on the Horizon?
Schlumberger Limited’s (SLB - Free Report) stock has surged 32.3% in the year-to-date period, outperforming the 12.6% rise of the industry. Based in Houston, TX, Schlumberger — with a market cap of $38 billion — is a leading oilfield services company, providing a range of services to oil and gas explorers as well as producers across the world.
Can It Retain Momentum?
The answer is yes and before we get into the details, let us show you how its estimates for 2021 stand. The Zacks Consensus Estimate for 2021 earnings per share stands at $1.25, signaling a massive increase from last year’s figure of 68 cents. The consensus estimate for 2021 revenues is pegged at $5.9 billion, indicating a rise from $5.3 billion in 2020.
The company beat earnings estimates in all the last four quarters, with an average of 17.8%.
Schlumberger Limited Price and EPS Surprise
Schlumberger Limited price-eps-surprise | Schlumberger Limited Quote
Now let’s delve into what’s driving the Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company’s greater reliance on the lucrative international market is praiseworthy. Being the leading provider of technologies for complex oilfield projects, Schlumberger is better positioned than most peers to take up new offshore projects in shallow water basins outside North America. The company expects international revenues to witness double-digit growth in second-half 2021. Adjusted EBITDA margin for 2021 is expected within 20.8-21.3%, signaling a rise from 18.3% in 2020. The free cash flow margin is likely to be more than 10% this year, indicating a significant jump from 6% recorded in 2020.
The company believes that despite adverse impacts on economic growth due to the coronavirus pandemic, international oilfield service activities will continue their growth momentum. Rising rig count, capital spending trends and customer feedbacks have been supporting its view. Its long-term deals with state-run companies and integrated firms are major positives. Additionally, its disciplined capital spending will likely benefit shareholders over the long term.
The company also focuses on improving its technology with changing market demand. Its decarbonization technology and customized digital integration are likely to position it to outperform peers. The company’s drive toward sustainability is appreciable. It is, similar to most major companies in the energy spectrum, targeting net-zero greenhouse gas emissions by 2050. The leading oilfield service player is planning on a 30% cut in Scopes 1 and 2 emissions by as early as 2025. The company expects to reach the short-term target ahead of schedule.
By 2030, Schlumberger is eying to cut Scopes 1 and 2 emissions by 50%. By this time frame, it is also planning to reduce Scope 3 emissions by 30%. Schlumberger boasts of becoming the first company in the energy service industry to add Scope 3 emissions ambition in the net-zero emission target. Thus, by providing technology to lower customer emissions, it will be better placed to meet future energy demand by addressing climate change.
Risks
There are a few factors that are holding back the stock from reaching complete potential. The oilfield service firm is expecting business growth from U.S. shale plays to remain slow since upstream energy players are allocating lower capital to exploration and production activities. Even though energy demand is expected to rise in the coming days, upstream companies are likely to focus on shareholder return instead of ramping up production. This, in turn, can hurt demand for Schlumberger's services. Nevertheless, we believe that its systematic and strategic plan of action will drive long-term growth.
Other Stocks to Consider
Other top-ranked stocks from the energy space include RPC, Inc. (RES - Free Report) , Cheniere Energy, Inc. (LNG - Free Report) and Kinder Morgan, Inc. (KMI - Free Report) , each carrying a Zacks Rank #2.
RPC’s bottom line for 2021 is expected to surge 88.9% year over year.
The Zacks Consensus Estimate for Cheniere Energy’s bottom line for 2021 is pegged at $2.98 per share, indicating a massive improvement from the year-ago loss of 34 cents.
Kinder Morgan’s bottom line for 2021 is expected to rise 47.7% year over year.