Schlumberger Is Down By 9%, Here Is Why

Key Insights

• WTI oil declines below the $100 level as traders fear that China would impose a lockdown in Beijing. 
• The recent dividend increase failed to provide enough support to Schlumberger stock as traders focused on the dynamics of the oil market. 
• Trading at 16 forward P/E, Schlumberger stock is not too cheap and would remain sensitive to oil price fluctuations. 

Schlumberger Stock Retreats As WTI Oil Slips Below The $100 Level

Shares of the leading oil services company Schlumberger gained strong downside momentum after WTI oil settled below the $100 level and moved closer to the $95 level.

Oil retreated on worries about a potential lockdown in Beijing, which could have a material impact on demand for oil. Not surprisingly, oil-related stocks declined on this news.

On April 22, Schlumberger released its first-quarter report. The company reported revenue of $5.96 billion and adjusted earnings of $0.34 per share, beating analyst estimates on both earnings and revenue. As the company’s results were strong, Schlumberger increased the quarterly dividend from $0.125 per share to $0.175 per share.

What’s Next For Schlumberger Stock?

Analysts expect that Schlumberger will report earnings of $1.7 per share in the current year and earnings of $2.36 per share in the next year, so the stock is trading at 16 forward P/E.

At current levels, the stock is yielding 1.84%, which is not sufficient enough to attract income-oriented investors at a time when traders expect that the Fed would raise rates aggressively.

It should be noted that analyst estimates have improved in recent months, but the pace of these improvements was modest.  In the current market environment, Schlumberger stock will likely remain sensitive to the developments in the oil markets. In case China is forced to introduce more lockdowns, oil would move lower, which will be bearish for Schlumberger shares.

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