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Reasons Why Hold Strategy is Suitable for SLB Stock Right Now
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SLB (SLB - Free Report) has gained 10.7% year to date compared with 8.6% growth of the composite stocks belonging to the industry.
The Zacks Consensus Estimate for SLB’s 2023 and 2024 earnings are pegged at $2.97 per share and $3.62, respectively.
Image Source: Zacks Investment Research
Factors Contributing to the Stock’s Positive Performance
Strong International Revenue Growth
In the third quarter, the Zacks Rank #3 company (Hold) reported its highest international revenue quarter since 2015, with notable year-over-year growth in the Middle East and Asia, led by significant growth in the key regions such as Saudi Arabia, the U.A.E., Kuwait and Egypt. This indicates a robust and expanding global presence, which is a positive for potential investors.
Resilience in Offshore Markets
The company has exhibited steadfast investment in offshore markets, notably in Africa, Brazil and Scandinavia. The recent completion of the OneSubsea joint venture with Aker Solutions and Subsea7 is anticipated to enhance SLB’s presence in these markets, providing opportunities for prospective growth.
Margin Expansion and Financial Performance
SLB has demonstrated a continuous expansion in EBITDA margins, reaching a new cycle high of 25%, and has experienced pretax segment operating margin expansion for 11 consecutive quarters year over year. This consistent margin expansion is a strong indicator of the company’s efficient operation and profitability.
Investment in Digital and New Energy
SLB is actively channeling investments into digital technologies and emerging energy sectors. The notable surge in users and compute hours on the Delfi digital platform signifies a rising adoption rate, pointing toward potential revenue streams from these technologies.
Opportunities in Transition Technologies
SLB is focusing on transition technologies like Carbon Capture, Utilization and Storage, and methane emission reduction, aligning with global energy transition trends. This strategic focus on emerging technologies positions the company well for market demands.
Strong Financial Outlook
SLB forecasts continued sequential revenue growth, and maintains high pretax segment operating and EBITDA margins. This positive outlook is bolstered by the expected contributions from the OneSubsea joint venture. The company’s strategic ventures like OneSubsea enhance its offering by bringing new levels of technology and partnership to the market.
Risks
While SLB’s business is dependent on upstream operations, the extreme volatility in commodity prices could adversely impact its business. Also, SLB has higher exposure to debt capital than composite stocks belonging to the energy sector.
Murphy USA’s (MUSA - Free Report) unique high-volume, low-cost business model helps it retain high profitability, even in the fiercely competitive retail environment.
MUSA remains committed to returning excess cash to its shareholders through continued share buyback programs. As part of this initiative, the fuel retailer recently approved a repurchase authorization of up to $1.5 billion following the completion of the existing $1-billion mandate. The move underscores MUSA’s sound financial position and commitment to rewarding its shareholders.
The Williams Companies (WMB - Free Report) is a premier energy infrastructure provider in North America. WMB has a thriving deepwater transportation business. The company's deepwater portfolio includes a 3,500-mile natural gas and oil gathering and transmission pipeline, and is important for the company's future cash flows.
Williams Companies’ debt maturity profile is in good shape, with its $4.5-billion revolver maturing in 2023. It is also paying its shareholders an attractive dividend yielding around 5%. Beside this, the company has a share repurchase program worth $1.5 billion, highlighting its commitment to shareholders.
Ecopetrol S.A. (EC - Free Report) operates across various segments of the oil and gas industry, including exploration, development and production of oil and gas, refining, transportation, and sale of petroleum products.
Ecopetrol has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days. The Zacks Consensus Estimate for earnings for EC’s 2023 and 2024 earnings are pegged at $2.32 per share and $2.41, respectively.
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Reasons Why Hold Strategy is Suitable for SLB Stock Right Now
SLB (SLB - Free Report) has gained 10.7% year to date compared with 8.6% growth of the composite stocks belonging to the industry.
The Zacks Consensus Estimate for SLB’s 2023 and 2024 earnings are pegged at $2.97 per share and $3.62, respectively.
Image Source: Zacks Investment Research
Factors Contributing to the Stock’s Positive Performance
Strong International Revenue Growth
In the third quarter, the Zacks Rank #3 company (Hold) reported its highest international revenue quarter since 2015, with notable year-over-year growth in the Middle East and Asia, led by significant growth in the key regions such as Saudi Arabia, the U.A.E., Kuwait and Egypt. This indicates a robust and expanding global presence, which is a positive for potential investors.
Resilience in Offshore Markets
The company has exhibited steadfast investment in offshore markets, notably in Africa, Brazil and Scandinavia. The recent completion of the OneSubsea joint venture with Aker Solutions and Subsea7 is anticipated to enhance SLB’s presence in these markets, providing opportunities for prospective growth.
Margin Expansion and Financial Performance
SLB has demonstrated a continuous expansion in EBITDA margins, reaching a new cycle high of 25%, and has experienced pretax segment operating margin expansion for 11 consecutive quarters year over year. This consistent margin expansion is a strong indicator of the company’s efficient operation and profitability.
Investment in Digital and New Energy
SLB is actively channeling investments into digital technologies and emerging energy sectors. The notable surge in users and compute hours on the Delfi digital platform signifies a rising adoption rate, pointing toward potential revenue streams from these technologies.
Opportunities in Transition Technologies
SLB is focusing on transition technologies like Carbon Capture, Utilization and Storage, and methane emission reduction, aligning with global energy transition trends. This strategic focus on emerging technologies positions the company well for market demands.
Strong Financial Outlook
SLB forecasts continued sequential revenue growth, and maintains high pretax segment operating and EBITDA margins. This positive outlook is bolstered by the expected contributions from the OneSubsea joint venture. The company’s strategic ventures like OneSubsea enhance its offering by bringing new levels of technology and partnership to the market.
Risks
While SLB’s business is dependent on upstream operations, the extreme volatility in commodity prices could adversely impact its business. Also, SLB has higher exposure to debt capital than composite stocks belonging to the energy sector.
Stocks to Consider
Investors interested in the energy sector might look at the following companies that presently sport a Zacks Rank #1 (Strong Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Murphy USA’s (MUSA - Free Report) unique high-volume, low-cost business model helps it retain high profitability, even in the fiercely competitive retail environment.
MUSA remains committed to returning excess cash to its shareholders through continued share buyback programs. As part of this initiative, the fuel retailer recently approved a repurchase authorization of up to $1.5 billion following the completion of the existing $1-billion mandate. The move underscores MUSA’s sound financial position and commitment to rewarding its shareholders.
The Williams Companies (WMB - Free Report) is a premier energy infrastructure provider in North America. WMB has a thriving deepwater transportation business. The company's deepwater portfolio includes a 3,500-mile natural gas and oil gathering and transmission pipeline, and is important for the company's future cash flows.
Williams Companies’ debt maturity profile is in good shape, with its $4.5-billion revolver maturing in 2023. It is also paying its shareholders an attractive dividend yielding around 5%. Beside this, the company has a share repurchase program worth $1.5 billion, highlighting its commitment to shareholders.
Ecopetrol S.A. (EC - Free Report) operates across various segments of the oil and gas industry, including exploration, development and production of oil and gas, refining, transportation, and sale of petroleum products.
Ecopetrol has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days. The Zacks Consensus Estimate for earnings for EC’s 2023 and 2024 earnings are pegged at $2.32 per share and $2.41, respectively.