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What Do Schlumberger’s Newly Added Risk Factors Reveal?

Schlumberger (SLB) is a global oilfield services company. It provides customers in the oil and gas industry with technology for drilling, production, and processing.

For Q4 2021, Schlumberger reported a 13% year-over-year jump in revenue to $6.2 billion, which surpassed the consensus estimate of $5.4 billion. It posted adjusted EPS of $0.41, rising from $0.36 in the same quarter the previous year and beating the consensus estimate of $0.34.

Schlumberger plans to distribute a quarterly dividend of $0.125 per share on April 7. The stock currently offers a dividend yield of 1.28%. 

With this in mind, we used TipRanks to take a look at the newly added risk factors for Schlumberger.

Risk Factors

According to the new TipRanks Risk Factors tool, Schlumberger’s top risk category is Legal and Regulatory, which contains 5 of the total 15 risks identified for the stock. Macro and Political and Tech and Innovation are the next two major risk categories, with 4 and 3 risks, respectively. Schlumberger has recently updated its profile with four new risk factors.

The company informs investors that the measures being taken to curb climate change could reduce the demand for its products and adversely impact its business. It mentions the Paris Agreement, Europe Climate Law, and other regulatory mandates aimed at limiting greenhouse gas emissions. The company goes on to explain that investors and financial institutions have launched initiatives to limit funding to businesses in the fossil fuel industry. As a result, its access to capital may be adversely affected, dealing a blow to its operating results, financial condition, and cash flow.

Schlumberger tells investors that it has set goals and targets related to sustainability, including emissions reduction. Because these plans have been discussed publicly, they have attracted increased scrutiny of the company’s sustainability activities from investors and other stakeholders.  The company cautions that if its sustainability practices fall short of expectations, its reputation and ability to attract and retain employees and investments could be harmed.

Schlumberger cautions investors that its global footprint exposes it to many challenges. The company operates in more than 120 countries, with about 85% of its revenue in 2021 coming from outside the U.S. While it relies on international operations for the majority of its revenue, Schlumberger warns that challenges like political instability, social unrest, and armed conflicts in international markets may adversely affect its business and financial condition.

SLB stock has gained about 24% year-to-date and more than 52% over the past 12 months.

Analysts’ Take

In January, BNP Paribas analyst Nick Konstantakis upgraded SLB stock to a Buy from a Hold. The analyst assigned the stock a price target of $45, which suggests 14.88% upside potential.

Consensus among analysts is a Strong Buy based on 14 Buys and 1 Hold. The average Schlumberger price target of $44 implies 12.33% upside potential to current levels.

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