Schlumberger versus peers and industry
Schlumberger (SLB) is the largest OFS (oilfield equipment and services) provider by market capitalization. It had a challenging run in the stock market in 2017. On August 30, 2017, Schlumberger was trading at $63.39, which was ~24% lower than its price since the beginning of 2017.
The VanEck Vectors Oil Services ETF (OIH), an ETF tracking an index of 25 OFS companies, has fallen 34% YTD (year-to-date). Schlumberger accounts for 21.4% of OIH. The Dow Jones Industrial Average (DJIA-INDEX) has risen 11% YTD. Basic Energy Services (BAS), Schlumberger’s smaller market cap peer, has fallen ~60% during the same period. For a comparison of the top OFS companies, read SLB, HAL, NOV, WFT: How They Stack Up after 2Q17.
Schlumberger’s stock price movement
Since January 2017, Schlumberger’s stock price has fallen. It reached its one-year low in August. Schlumberger’s revenue has been steady in the past five quarters until 2Q17. It recorded a net loss in three of the last five quarters. Schlumberger’s free cash flow has fallen significantly in the last five quarters.
The West Texas Intermediate crude oil price has fallen 14% since the beginning of 2017. It posted a recovery in 2016, which partially explains Schlumberger’s weak run in 2017. Read Will US Crude Oil Inventories Outweigh Harvey? to learn more about crude oil prices. Lower crude oil prices can lead to lower energy exploration and development activity, which can have a negative impact on OFS companies like Schlumberger, Halliburton (HAL), and Weatherford International (WFT).
Schlumberger’s moving averages
On August 30, 2017, Schlumberger’s stock price was at a 3.4% discount to its 50-day moving average. It’s trading 16% below its 200-day moving average. Moving averages exhibits a smoother trend following the stock’s price movement.
A 50-day moving average is a short-term moving average, while a 200-day moving average shows a long-term trend. Barring a brief period in July 2017, Schlumberger’s stock price has been below its short-term moving average in the past year. Schlumberger’s short-term moving average crossed below its long-term moving average in April 2017. It indicates that Schlumberger stock is bearish.
In this series
In this series, we’ll analyze Schlumberger’s top line and bottom line, balance sheet, free cash flow, and industry growth drivers. In the next part, we’ll start with management’s comments.