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Understanding Schlumberger’s Returns and Capex Guidance after 2Q16

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Jul. 25 2016, Updated 9:07 a.m. ET

Share price reaction

Schlumberger (SLB) released its financial information for 2Q16 on July 21, 2016. Its stock reacted somewhat negatively after the earnings release, decreasing by ~1% to $79.72 from the previous day’s close. Since the beginning of the year, SLB’s share price has risen by 15%.

By comparison, FMC Technologies (FTI), which released its financial information for 2Q16 on July 20, saw a 1.2% increase in share price on the day of the earnings release.

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Share price returns compared to industry

In the past year, Schlumberger’s stock has returned -2.5% (net of dividends) as of July 21. During the same period, SLB has outperformed the VanEck Vectors Oil Services ETF (OIH), which has returned a -8%. The Energy Select Sector SPDR ETF (XLE), the broader energy industry ETF, has produced an approximate -2% return. SLB has outperformed the US rig count, which returned a -48% in the past year. Schlumberger has, however, underperformed the SPDR S&P 500 ETF (SPY), which has returned 4.4% during the same period.

Capex guidance for 2016

SLB’s 2Q16 FCF (free cash flow) was $885 million in 2Q16, including SPM (Schlumberger Production Management) investment and multi-client seismic data. The company’s capital expenditure, or capex, for 2Q16 was $449 million. For 2016, SLB’s capex guidance is $2.2 billion, or 8% lower than in 2015.

To learn about Schlumberger in depth, check out Market Realist’s “Is Schlumberger Looking Attractive after the Cameron Acquisition?” But first, continue to the next and final part of this series for a discussion of Wall Street analyst targets for Schlumberger.

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