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Schlumberger Stock Is Steady After Beating Estimates

Schlumberger Stock

Schlumberger (NYSE: SLB) stock price received support from stronger than expected fourth-quarter results. The largest oilfield service company topped revenue and earnings estimates along with reporting a considerable increase in free cash flows. SLB management appears optimistic about future trends considering an improvement in oil prices.

Schlumberger’s stock price is currently trading in the range of $40. SLB share price looks undervalued due to its valuations. The shares are trading around 21 times to earnings compared to the industry average of 25 times. SLB’s dividends are also safe. Therefore, it is always considered a good stock for a dividend portfolio.

SLB Schlumberger Limited daily Stock Chart

Q4 Beat is Adding to Schlumberger Stock Upside

The company topped Q4 revenue and earnings estimate by $70 million and $0.02 per share. Its revenue of $8.23 billion increased 1% from the year-ago period. Moreover, its international revenue grew 8% year over year while North American revenue declined 13% Y/Y. Its pre-tax operating margin rose 40 bps in the fourth quarter from the past year period.

We are confident we have turned the corner, particularly as we have now seen sequential international margin growth for the last three quarters as a result of our discipline and focus on execution performance,” CEO Olivier Le Peuch says.

The largest oilfield service company reported a full-year worldwide revenue of $32.9 billion, thanks to robust demand from international markets.

Cash Returns are Safe

Schlumberger currently offers a quarterly dividend of $0.50 per share, yielding above 5%. Its cash returns are safe considering the cash generation potential. The company has generated an operating cash flow of $2.3 billion compared to capital investments of $0.8 billion.

Thus, the company was left with $1.7 billion in free cash flows, which is more than enough to cover dividend payments of $0.6 billion. Consequently, SLB has also been working on share buybacks. Overall, the improvement in oil prices is likely to enhance drilling and production activities in fiscal 2020.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.