Bear of the Day: Schlumberger (SLB)

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Schlumberger Ltd. (SLB) shares hit a new 5-year low in 2018 as plunging oil prices spooked investors. This Zacks Rank #5 (Strong Sell) is expected to see flat earnings year-over-year in 2019.

Schlumberger is the world's leading provider of technology for reservoir characterization, drilling, production, and processing to the oil and gas industry. It has a market cap of $50 billion.

Schlumberger to Report Fourth Quarter Results in Mid-January

On Jan 18, before the bell, Schlumberger will report its fourth quarter results.

It has an excellent track record of beating the estimate with just 1 miss in 5 years.

This will be heavily anticipated as the third quarter report was before the recent oil price plunge and subsequent production cuts by some countries.

Canada, for instance, has already cut its rig count in half in a matter of weeks.

Some of that is to prepare for the winter as the Canadians apparently routinely shut down rigs at the end of the year, but this year's cuts have been far more dramatic.

Shareholder Friendly

On Oct 19, Schlumberger reported its third quarter results. It saw free cash flow of a $1 billion in the quarter.

It's been rewarding shareholders. During the third quarter, it repurchased 1.5 million shares for a total of $100 million.

The company also continues to pay a dividend, now yielding a juicy 5.5%.

Shares at Multi-Year Lows

Investors fled the energy stocks at the end of 2018. Schlumberger shares fell 48% in 2018 and are now at multi-year lows.

That's hard to believe because the energy stocks got pretty grim during the 2015-2016 downturn too.

Are they a deal?

They're not cheap. They still trade with a forward P/E of 22.2 because 11 estimates for 2019 have been cut in the last 90 days lowering the Zacks Consensus Estimate to $1.65 from $1.78.

Investors might be wise to steer clear of the service companies altogether right now. Competitor Halliburton (HAL) also saw a big stock decline in 2018, falling 46%. But it, too, is a Zacks Rank #5 (Strong Sell).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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