Markets
SLB

Schlumberger (SLB) Down 7.5% Since Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Schlumberger N.V . SLB . Shares have lost about 7.5% in in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Fourth-Quarter 2016 Results

Schlumberger's fourth-quarter 2016 earnings of $0.27 per share (excluding charges and credits) were in line with the Zacks Consensus Estimate. Higher activities in the U.S. land market, recovery of fracturing works in unconventional resources, and higher horizontal logging work in Qatar favored the result.

However, the bottom line decreased substantially from $0.65 per share earned in the year-earlier quarter. Slowdown of drilling works due to frigid winter in Russia and Norway resulted in the year-over-year deterioration.

Schlumberger reported total revenue of $7,107 million. The top line deteriorated from the year-earlier level of $7,744 million but topped the Zacks Consensus Estimate of $7,096 million.

Segmental Performance

Each of the groups - Reservoir Characterization, Drilling Group and Production Group - registered year-over-year fall in revenues.

Drilling Group revenues decreased primarily due to slowdown in activities owing to severe winter conditions in Russia and Norway. However, the negatives were partially mitigated by the improvement in land market activities in the U.S.

Results of the Production Group were adversely impacted by reduced completion works in certain regions. Recovery of fracturing works in unconventional resources partially offset the negatives.

Reservoir Characterization segment was affected by seasonal decline in wireline operations in the Northern Hemisphere. However, higher horizontal logging work in Qatar, along with increased software license and maintenance sales, partially offset the negatives.

Reservoir Characterization: This group posted revenues of $1,699 million as against $2,193 million in the prior-year quarter. Pre-tax operating income was $316 million, down 39% year over year.

Drilling Group: Revenues of $2,013 million plunged 32% year over year. Pre-tax operating income was $234 million, down 53% year over year.

Production Group: Revenues recorded by this group declined 17% from the year-earlier quarter to $2,179 million. Pre-tax operating income was $132 million, down 56% year over year.

Financials

As of Dec 31, 2016, company had approximately $9,257 million in cash and short-term investments and $16,463 million in long-term debt, representing a debt-to-capitalization ratio of 32.1%. In the reported quarter, the company repurchased 1.5 million shares at an average price of $78.21 for a total purchase price of $116 million.

Guidance

During 2017, the company will likely invest $2.2 billion. This is slightly higher than $2.1 billion invested during 2016.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. There have been three revisions higher for the current quarter compared to seven lower. In the past month, the consensus estimate has shifted 7.55% downward due to these changes.

Schlumberger N.V. Price and Consensus

Schlumberger N.V. Price and Consensus | Schlumberger N.V. Quote

VGM Scores

At this time, Schlumberger's stock has a subpar Growth score of 'D', though it is lagging a bit on the momentum front with an 'F'. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregte VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Schlumberger N.V. (SLB): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

SLB

Other Topics

Earnings

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More