Schlumberger (SLB) Up 43.9% in 6 Months: More Room for Rally?

Shares of Schlumberger Limited SLB have jumped 43.9% in the past six months compared with the industry’s 28.5% growth. The currently Zacks Rank #3 (Hold) stock with a market cap of $36.4 billion has witnessed an upward revision in the Zacks Consensus Estimate for 2021 earnings over the past seven days.

Let’s delve deeper into the factors behind this stock price appreciation.

What’s Favoring the Stock?

The price of West Texas Intermediate (WTI) crude has risen more than 10% since the onset of 2021 and is now approaching the $55 a barrel mark. Thus, the price of crude oil has witnessed a significant recovery over the past several months since the commodity price slipped into a negative territory in April 2020.

The positive momentum is likely to continue with the recent coronavirus vaccine rollout and the massive pandemic aid bill that was lately signed into law by President Donald Trump. These positives have already been bolstering investor confidence in a strong fuel demand rebound this year.

Notably, the recent surge in the commodity price was also supported by a surprise move by Saudi Arabia that will see the kingdom unilaterally cut 1 million barrels of crude production every day starting this February through March.

Evidently, the business scenario for oil explorers and producers is getting better with the crude pricing scenario growing healthier. In fact, oil drillers already started returning to prolific domestic shale plays, which can be gauged from the weekly rig count of Baker Hughes Company BKR. The ramp-up in upstream activities is likely to boost demand for the oilfield service players as they help drillers in efficiently drilling the oil wells.

Being a leading energy equipment and services company with operations spread across roughly 120 countries, Schlumberger is well poised to capitalize on the prevalent uptrend. The company’s strong focus on lucrative international business is a positive since the oilfield service player is consistently generating resilient and considerable cashflows from the international market. Importantly, Schlumberger now expects revenues from the international market to contribute to more than 80% of its consolidated revenues following the completion of the two North America transactions.

Overall, the stock has more upside potential left, courtesy of a healthier business environment and its stronger focus on a more profitable international market.

Stocks to Consider

Better-ranked stocks in the energy space include Summit Midstream Partners, LP SMLP and DCP Midstream, LP DCP. While Summit Midstream carries a Zacks Rank #2 (Buy), DCP Midstream sports a Zacks Rank #1 (Strong Buy), presently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Summit Midstream has seen northbound earnings estimate revisions for 2020 in the past seven days.

DCP Midstream has seen upward estimate revisions for 2020 earnings in the past 30 days.

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Schlumberger Limited (SLB) : Free Stock Analysis Report
 
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