Shares of SLB (SLB) were down 1.1% in the pre-market trading session after the company reported lower-than-expected Q1 results. The oilfield services company’s adjusted earnings decreased by 4% year-over-year to $0.72 per share and came below the consensus estimates of $0.74 per share.
Also, SLB reported $8.49 billion in revenue, a 3% drop compared to the same quarter last year, and missed the Street’s expectations of $8.6 billion.
SLB’s performance is closely linked to the prices of oil and natural gas. The recent drop in these prices has made things tough for the company. Importantly, West Texas Intermediate (WTI) crude oil, the U.S. benchmark, is down 14% so far this year.
SLB’s Segment-Wise Performance
SLB’s major revenue contributing segment, Well Construction, faced a 12% drop in revenues to $2.98 billion. Also, operating income was down 15%, reflecting reduced activity or pricing pressures. Further, revenue from the Reservoir Performance unit declined 1% year-on-year to $1.7 billion.
On the other hand, the Digital & Integration segment’s revenue grew by 6% to $1.01 billion, driven by strong demand for digital solutions.
At the same time, sales from the Production Systems unit increased by 4% year-on-year to $2.94 billion, due to strong demand for surface production systems and completions.
According to Main Street Data, all of SLB’s segments have shown decent growth in the past five years. Particularly, the Production Systems and Well Construction units have grown at a CAGR of 16% and 12%, respectively.
SLB’s Adjusted EBITDA Margin Showed Resilience
SLB’s CEO, Olivier Le Peuch, highlighted that despite lower Q1 revenue, the company’s adjusted EBITDA margin improved slightly year-on-year. This was achieved through growth in digital and production systems businesses, cost-cutting efforts, and strategic diversification beyond oil and gas.
Is SLB Stock a Good Buy?
Turning to Wall Street, SLB stock has a Moderate Buy consensus rating based on eight Buys and one Hold assigned in the last three months. At $51.56, the average SLB price target implies a 47.61% upside potential.
