Schlumberger NV (NYSE: SLB) has captured market attention with its Q2 2024 earnings, which surpassed expectations. The company reported a Non-GAAP EPS of $0.85, exceeding estimates by $0.02. Revenues reached $9.14 billion, beating forecasts by $50 million and reflecting a year-on-year growth of 4.9%.
These impressive figures underscore a robust quarter for Schlumberger.
Schlumberger Q2 highlights
Schlumberger’s financial strength is evident with a solid cash flow from operations amounting to $1.44 billion and free cash flow of $776 million.
This robust financial health has enabled the Board to approve a quarterly cash dividend of $0.275 per share, signaling confidence in the company’s stable cash generation capabilities.
Olivier Le Peuch, CEO of Schlumberger, commented on the broad-based international revenue growth and margin expansion across all divisions.
The core businesses, particularly in digital and international markets, have shown substantial growth, contributing to the highest quarterly international revenue since 2014.
Schlumberger’s resilience and strategic positioning in key markets such as the Middle East and Asia have driven significant growth. Revenue in these regions increased by 6%, driven by capacity expansions and gas development projects.
The company’s strategic advancements extend beyond financials, with significant strides in technology and innovation, particularly in digital integration and new energy sectors.
A recent joint venture with Aker Carbon Capture aims to accelerate carbon capture adoption, with Schlumberger owning an 80% stake.
This move is part of a broader strategy to enhance technological offerings and operational efficiencies sustainably.
Additionally, Schlumberger has secured notable contracts, including a deal with Saudi Aramco for unconventional gas directional drilling services and several contracts from Equinor for subsea projects, setting new industry standards for operational efficiency and reduced emissions.
Analysts lowered targets going into earnings
Financial analysts had mixed reactions to Schlumberger’s performance going into the earnings. On July 15, 2024, analysts at Bank of America reiterated their ‘Buy’ rating but lowered their price target to $58.00 from $62.00.
Similarly, analysts at Piper Sandler maintained their ‘Overweight’ rating but reduced their price target to $66.00 from $71.00. Earlier, on July 11, analysts at Susquehanna reaffirmed their ‘Positive’ rating yet decreased their price target to $70.00 from $77.00.
Despite these lowered targets, Schlumberger appears well-positioned to capitalize on ongoing shifts in the energy sector.
Its focus on international and offshore markets, coupled with efforts in digitalization and new energy solutions, is likely to solidify its market position, offering potential for sustained growth and shareholder returns.
Long-Term downtrend remains
Schlumberger’s stock was in a long-term uptrend from March 2020, when it fell below $12.50, until September last year when it peaked above $62.
However, since reaching that high, the stock has entered a bearish phase, characterized by a pattern of lower highs and lower lows on its daily price charts, indicating a downward trend.
SLB chart by TradingView
Despite the recent upward movement, the stock continues to follow a downtrend on long-term charts, with its 50-day moving average trading below its 100-day moving average.
This trend will only reverse if it surpasses its previous swing high at $55.69. Bulls considering buying the stock after a strong Q2 performance must exercise caution and avoid going long at current levels.
Traders who remain bearish on the stock can take advantage of today’s uptick with a low-risk entry.
They can short the stock if it fails to sustain its upward momentum near $50, with a stop loss at $55.75. If bears regain control, Schlumberger’s stock could fall to its recent swing low near $42 and, if that fails to hold, down to its October 2023 lows near $34, where profits can be booked.
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