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Tim Smith
Schlumberger Limited Website

Shares in Schlumberger Limited (SLB) bucked broader weakness in the energy sector Friday, gaining nearly 1% after the oilfield services provider delivered a better-than-expected fourth-quarter report.

The Houston-based company reported quarterly earnings of 22 cents per share, comfortably above the 17 cent figure analysts had expected. Meanwhile, revenues of $5.5 billion topped estimates by $300 million. Notably, sequential sales rose across all four of the company’s business divisions during the period, indicating recovering economic activity. On a year-over-year (YoY) basis, top-and bottom-line growth declined 33% and 44%, respectively. Management credited increasing contributions from digital solutions and growing multiclient seismic license sales for the encouraging results.

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Cash flow also improved during the quarter, coming in at $554 million despite shelling out $144 million in severance payments. Moreover, the company sees the trend continuing this year. “We are confident in our ability to further improve cash flow generation in 2021, which will allow for debt reduction,” CEO Olivier Le Peuch told investors during the earnings call, per the company’s website.

Through Friday’s close, Schlumberger shares have a market capitalization nearing $34 billion, offer a 2.05% dividend yield, and trade 33% lower over the past 12 months. However, since the start of the year, the stock has gained almost 12%. From a valuation standpoint, the shares have a forward-earnings multiple of 25.7 times, 25% below their five-year average multiple of 34.5 times.

Wall Street View

Citigroup analyst Scott Gruber remains bullish on the stock. “Schlumberger remains our top pick in oilfield services given their leverage to recovery abroad, margin expansion prospects, and free cash flow generative business model,” he wrote in a client note cited by Barron’s.

Other sell-side firms overwhelmingly share Gruber’s view. The stock receives 21 ‘Buy’ ratings, 2 ‘Overweight’ ratings, and 8 ‘Hold’ ratings. Just one analyst currently recommends selling the shares. Twelve-month price targets range widely from a Street-high $37 to a low of $17, with the median sitting at $27.

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Technical Outlook and Trading Tactics

Schlumberger shares initially sold off after releasing results but staged an impressive intraday turnaround to complete a piercing line bullish reversal pattern. As added confluence, the bounce occurred at the $24 level, where price finds crucial support from the June and December swing highs. Furthermore, the 50-day simple moving average (SMA) crossed back above the 200-day SMA in early December to form a “golden cross” – a technical signal often marking the start of a new uptrend.

Active traders who enter here should consider placing a stop-loss order slightly beneath Friday’s low at $23.45 and target a move up to longer-term resistance at $31.

For a look at today’s earnings schedule, check out our earnings calendar.

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