To The Moon

$Schlumberger(SLB)$ is scheduled to report their fourth-quarter earnings on 17 Jan 2025 before the market open. The consensus estimate for fourth-quarter revenues is currently looking at $9.2 billion, which is a 2.1% increase from same period one year ago.

The consensus estimate for fourth-quarter earnings is set at 90 cents per share, implying growth of almost 5% from same period year-ago.

Look Out For Ongoing Margin Expansion For Better Results

Schlumberger, a leader in areas such as carbon management and energy systems integration, addresses various elements of the global energy landscape. The company has reported an adjusted EBITDA of $6.687 billion for the first nine months of 2024, an increase from $5.830 billion in the same period of 2023. Its adjusted EBITDA margin also improved, reaching 24.8% for the first nine months of 2024, up from 24.1% in 2023.

SLB ongoing margin expansion to drive full-year adjusted EBITDA margins of 25% or higher for 2024. The company’s strong cash flow, coupled with the sale of its Palliser asset in Canada, is expected to support greater returns to shareholders.

Previous Earnings Sentiment Neutral

SLB have suffered a 7.02% decline since its last earnings report on 18 Oct 2024, the sentiment hence is neutral.

The earnings call conveyed strong operational performance, particularly in digital growth and margin expansion. However, revenue growth remained flat, and there were challenges in the North American market and macroeconomic environment. Despite these challenges, SLB's strategic initiatives and cost optimization suggest resilience and potential for future growth.

SLB Guidance Highlight Few Key Metrics To Watch

During the SLB earnings call for the third quarter of 2024, the company provided guidance highlighting several key metrics and strategies moving forward. SLB reported a strong adjusted EBITDA margin of 20.6%, with a goal to achieve full-year adjusted EBITDA margins at or above 25%.

The company generated robust free cash flow of $1.81 billion during the quarter and anticipates continued margin expansion in the fourth quarter.

Looking ahead to 2025, SLB expects international upstream spending to grow in the low to mid-single digits, while North America might see flat to slightly decreased spending. The digital business remains a significant contributor, poised to achieve full-year revenue growth in the high teens, with ambitions to reach approximately $3 billion next year. SLB also plans to leverage its differentiated portfolio and digital leadership to support further margin expansion and increased shareholder returns.

Schlumberger CEO, Olivier Le Peuch, addressed the challenges facing the commodity market, including oversupply, reduced demand, and slower economic growth, particularly in regions like China, the U.S., and Europe.

Despite these pressures, SLB maintains confidence in the long-term outlook for the oil and gas industry. However, the company does not foresee a near-term recovery in North American activity. Schlumberger sees a modest increase in upstream spending in international markets in 2025 while spending in North America is expected to remain flat or decline slightly.

Pressures From U.S. Sanctions

SLB (SLB), the largest oilfield services provider, faces pressure from U.S. sanctions to cease its operations in Russia. Members of Congress have urged the company to comply with the Biden administration's new sanctions or risk legal complications. Despite the geopolitical tensions, SLB has continued its operations in Russia, raising concerns about potential breaches of U.S. regulations.

Successful Sale of Palliser APS Project

SLB signed a definitive agreement to sell its interest in the Palliser APS project, reducing capital intensity and removing significant future abandonment liabilities.

Digital Innovations and Partnerships

SLB launched the Lumi data and AI platform and announced collaborations with NVIDIA and Amazon Web Services to develop new AI solutions and expand digital capabilities.

Technical Analysis - Multi-timeframe

Despite WTI crude oil futures gained nearly 4%, SLB trading below the long-term (200MA) period is worrying, though we are seeing it touching the level.

But if SLB can give us a more positive forecast since there is certainly more drilling optimism around. MACD is showing upside movement so this could be a sign of SLB bulls trying to make an attempt for daily uptrend.

For the MTF, we need to be cautious as it is showing downtrend for most of the periods, this could mean that SLB might suffer a correction upon its earnings.

Summary

SLB have multiple challenges which might hamper its earnings, though the company is looking forward to its margin expansion, sanction from U.S. to cease operations in Russia might cause some impact to its overall earnings.

I would be monitoring on how SLB would be trading today (16 Jan) to see how market sentiment build up for this energy stock.

Appreciate if you could share your thoughts in the comment section whether you think SLB would be able to give an earnings surprise.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.