What kind of company is Schlumberger

Schlumberger Share Prediction: What's Next for the Stock? More of the same

Schlumberger is considered the leading provider of technology and services for the energy industry. Some of the products the company offers include seismic acquisition and processing services for the petroleum industry.

Although Schlumberger holds the title of an elite company in the energy industry, it has struggled with problems since 2019. Investors began to watch it closely, and the bears took control of the buy or sell debate on SLB stock.

The Schlumberger stock forecast quickly deteriorated due to factors beyond the control of the company, namely the Covid-19 pandemic and oil prices, which slipped into negative numbers for the first time. The pessimistic Schlumberger stock news pushed the stock to a new multi-year low of $ 11.87 in early 2020, with a very weak rebound thereafter.

What's next for the company? What is the Schlumberger share recommendation from industry experts? The answer might be obvious: more of the same.

Schlumberger - trade SLB CFD

Schlumberger share analysis: 2019 ends on a disappointing note

2019 was a year in which companies showed impressive growth rates that were rewarded with higher stock multiples. For the most part, tech stocks were heavily favored while energy stocks were left behind - and Schlumberger is a prime example.

Schlumberger reported in its fourth quarter earnings announcement that full year revenue of $ 32.9 billion was essentially flat year over year.

North America revenue "fell sharply" 10% to $ 10.843 billion as its customers "hit their budget limits earlier in the year and continued to be very disciplined about capital expenditures."

Schlumberger's management tried to reassure investors that it is doing everything in its power to support a better SLB stock price forecast for 2020. Most importantly, management said it believes "the recent escalation in geopolitical risk should lay the foundation for future oil price hikes".

The dramatic scenario of the management forecast did not materialize as oil prices brought in below zero.

Obviously, it is difficult to blame management as the factors that lead to negative oil prices aren't even a unique occurrence. But this isn't a reason for investors to hold onto the stock when many tech stocks have direct exposure to Covid-related tailwinds, like working from home.

As the pandemic spread across the world, there were many early signs of falling oil demand. Hundreds of millions, if not billions, of people were suddenly forced to stay in their homes and the world economy was almost brought to a standstill.

In March it was clear why almost everyone thought the Schlumberger share forecast was bearish. On April 17th it was confirmed that the Schlumberger stock analysis was correct.

Unprecedented crisis

Schlumberger announced in its April first quarter results report that revenue fell 9% quarter over quarter to $ 7.455 billion and net income swung from a $ 333 million profit to a loss of $ 7.4 billion.

Management called the "unprecedented global health and economic crisis" along with dramatic effects from Russia and Saudi Arabia in the OPEC talks.

"This double black swan event caused simultaneous shocks to oil supply and demand, creating the most challenging environment in the industry for many decades."

Management appears to have come up with their own Schlumberger stock forecast, and it wasn't pretty. Customer feedback and the company's own projections suggest that global Capex spending will decrease 20% in 2020, while the most important North American segment will see a 40% decrease. The international E&P capex will also decrease by around 15%.

Global economic activity is "falling sharply" and the oil market sees an imbalance in supply and demand of at least 20 million barrels a day and up to 30 million barrels a day, the company said.

"This creates short-term uncertainties about activities and budget projections," the company also noted.

At the same time, the dividend was cut by 75% to prop up the balance sheet and maintain a strong liquidity position and investment grade rating should the company need to tap into financial markets to raise capital.

If a management team publishes negative guidance in conjunction with a massive dividend cut, it should be kept vigilant. The company's message to investors is clear: do not expect a positive Schlumberger share forecast in the short term.

From the rain in the eaves

Schlumberger's July (Q2) earnings report shows that the company has not made any significant recovery. Revenue decreased 28% to $ 5.356 billion, while North America revenue fell at a much faster rate of 48% to $ 1.183 billion.

This Schlumberger share news came as no surprise. According to various metrics, the pandemic accelerated, especially the global death rate.

From an energy perspective, oil prices may have bounced back from negative territory, but supply and demand imbalances remained strong due to "demand destruction from global Covid-19 containment efforts".

But all was not a failure and management marked some accomplishments in the face of one of the toughest business environments in decades.

Three of the four corporate divisions and more than half of the 13 international GeoMarkets were able to expand or maintain their international margins compared to the previous quarter.

Nevertheless, the company found that every glimmer of hope must be perceived with a grain of salt. Any major Covid-19-related disruption to the collapse in oil demand from a slower economic recovery "could pose downside risks" to any current momentum.

The company took the opportunity to position itself better for the future by reducing structural costs by $ 1.5 billion annually and reorganizing to become "more efficient and responsive."

In the meantime, management has forecast that sales for the third quarter (reporting date: October 16) will remain unchanged compared to the previous quarter. However, the operating income and profit margin should increase due to the restructuring efforts, changes in the occupational mix and the lasting benefits from digital adaptation.

Conclusion: Does the Schlumberger share forecast offer no hope of upward momentum?

Ahead of the Schlumberger third quarter report and late 2020, investors should expect more of the same: Revenues have been dramatically impacted by weak oil demand and Covid-19 outages. In many ways, nothing has changed over the months from either perspective.

But does that mean you shouldn't invest in Schlumberger stock? If, for whatever reason, investors want low-level access to the energy sector, there are few companies like Schlumberger that deserve to be included in your portfolio.

Remember that contracts for difference can take advantage of both downward and upward movements. Follow the Schlumberger share performance on our interactive live chart and make your own prediction as to whether it is the right time to invest in the energy company.

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