Schlumberger Ltd. (NYSE: SLB) reported stronger-than-expected Q4 results, topping both earnings and revenue estimates driven by robust performance across all segments and regions. Despite the beat, shares of the company dropped 1.9% on January 21 to close at $36.36.
Schlumberger is an oilfield services company that provides technology for reservoir characterization, drilling, production and processing to the oil and gas industry. It operates through four divisions: Digital & Integration, Reservoir Performance, Well Construction, and Production Systems.
Q4 Performance
Q4 adjusted earnings of $0.41 per share almost doubled year-over-year and exceeded analysts’ expectations of $0.34 per share. The company reported earnings of $0.22 per share for the prior-year period.
Furthermore, revenues jumped 13% year-over-year to $6.22 billion and exceeded consensus estimates of $5.37 billion. Regionally speaking, International revenues grew 13% year-over-year to $4.9 billion, while North American revenues grew 10% to $1.3 billion despite divestitures of certain businesses in North America during the fourth quarter.
Segment-wise, the increase in revenues reflected a surge in Well Construction revenues, which increased 28% to $2.38 billion and a 7% growth in Production Systems revenues to $1.76 billion. Furthermore, Digital & Integration revenues also grew 7% to $899 million, while Reservoir Performance revenues grew 3% to $1.28 billion.
Markedly, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin grew 320 bps year-over-year to 21.5%, the highest since 2018.
During Q4, the Board approved a quarterly dividend of $0.125 per share payable on April 7, to shareholders on record as of February 9.
CEO Comments
Looking forward to FY22, Schlumberger CEO, Olivier Le Peuch, commented, “the industry macro fundamentals are very favorable, due to the combination of projected steady demand recovery, an increasingly tight supply market, and supportive oil prices. We believe this will result in a material step up in industry capital spending with simultaneous double-digit growth in international and North American markets.”
He further added, “Absent any further COVID-related disruption, oil demand is expected to exceed prepandemic levels before the end of the year and to further strengthen in 2023. These favorable market conditions are strikingly similar to those experienced during the last industry supercycle, suggesting that resurgent global demand-led capital spending will result in an exceptional multiyear growth cycle.”
Wall Street’s Take
Following the robust Q4 results, BMO Capital Analyst Phillip Jungwirth increased the price target on Schlumberger to $43.00 (18.26% upside potential) and reiterated a Buy rating.
Consensus among analysts is a Strong Buy based on 7 Buys and 1 Hold. The average Schlumberger stock price projection of $42.11 implies 15.8% upside potential to current levels.
TipRanks’ Smart Score
SLB scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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