Schlumberger (SLB) Stock Jumps 7.7% on Uplifting Forecasts
Schlumberger Limited SLB recently provided encouraging forecasts for the oil industry in the Bernstein Strategic Decisions Conference 2021. The company has also provided exceptional estimates for this year. As such, the stock jumped 7.7% yesterday.
The oilfield service provider expects 2021 revenues to be more than $22.5 billion, marginally higher than the Zacks Consensus Estimate of $22.4 billion. However, the figure indicates fall from the 2020 level of $23.6 billion. Adjusted EBITDA margin for 2021 is expected within 20.8-21.3%, signaling a rise from 18.3% in 2020. Moreover, free cash flow margin is likely to be more than 10% this year, indicating a significant jump from 6% recorded in 2020.
Schlumberger reiterated 2021 capital investment view within $1.5-$1.7 billion. Last year, the metric was $1.5 billion. The company believes that there has been an increase in the optimism for fuel demand recovery in 2021, thanks to the rolling out of coronavirus vaccines. It expects oil demand to recover to pre-2019 levels by 2022-end. As such, the growth cycle can provide the company with immense potential to capture a larger share of the market with low-carbon technology.
Moreover, as Schlumberger expects oil activities to improve in the coming days, demand for oilfield services will likely get a boost. The situation will, in turn, enable Schlumberger and other firms like Core Laboratories N.V. CLB, Oceaneering International, Inc. OII and Solaris Oilfield Infrastructure, Inc. SOI to raise prices for their services and products. The expected rise in drilling is supposed to generate more cash flow and enable the companies to reduce their debt burden.
During first-quarter earnings release, it stated that 2021 exit demand rate for oil will likely be only 2 MMBbls/d lower than the 2019 figure. This in turn will boost oilfield services and activities in international markets through 2021-end and beyond. As such, the company expects international revenues to witness double-digit growth in second-half 2021.
Price Performance & Zacks Rank
The company has gained 80.8% in the past year compared with 49.6% rise of the industry it belongs to. Schlumberger currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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