SLB Navigates a Turbulent 2024, Showing Signs of Recovery in Early 2025
SLB (formerly Schlumberger), a global leader in oilfield services, faced a challenging year in 2024, with its stock price underperforming both the broader energy sector and its industry peers. The company’s stock struggled amidst a complex market environment, impacted by various factors influencing the energy landscape. However, the start of 2025 has brought a glimmer of optimism, with SLB’s stock showing signs of recovery, outpacing both the S&P 500 and its competitor Halliburton. This resurgence in performance raises questions about the underlying drivers and the company’s prospects for the remainder of the year.
The recent uptick in SLB’s stock price can be attributed, in part, to the company’s fourth-quarter 2024 earnings report, which exceeded market expectations. SLB reported adjusted earnings per share (EPS) of $0.92, surpassing the anticipated $0.90, and revenue of $9.3 billion, beating the projected $9.18 billion. This positive performance was driven by robust growth in the company’s digital and integration segments, offsetting challenges faced in its Well Construction and Latin American operations. The North American market showed signs of rebounding, with sales increasing both sequentially and year-over-year. This performance suggests a potential turning point for SLB, signaling a possible recovery from the difficulties experienced in the previous year.
Despite the challenges in 2024, SLB’s full-year revenue for 2024 grew by 10% year-over-year, reaching $36.3 billion. This growth was primarily driven by a 12% increase in international revenue, particularly from the Middle East & Asia and Europe & Africa regions, highlighting the importance of these markets to the company’s overall financial performance. While North American revenue saw a slight decline, its contribution represents only around 20% of SLB’s total revenue, emphasizing the significance of the company’s global reach and diversified operations. The acquisition of the Aker subsea business, integrated into the OneSubsea joint venture, further bolstered SLB’s international revenue, contributing significantly to the overall growth.
Looking at the company’s segment performance, the 1% decline in Well Construction revenues was more than compensated by the growth in other segments. Production Systems saw a substantial 24% increase in revenue, while Reservoir Performance and Digital & Integration segments also experienced solid growth, demonstrating the company’s diversified portfolio and its ability to leverage opportunities across different areas. This diversified revenue stream provides a level of resilience against fluctuations in individual market segments, contributing to overall stability.
An analysis of SLB’s stock performance over the past four years reveals significant volatility, with annual returns fluctuating widely. While the company experienced substantial gains in 2021 and 2022, it faced declines in 2023 and a significant drop in 2024. This volatility underscores the inherent risks associated with investments in individual stocks, particularly within the cyclical energy sector. In contrast, diversified portfolios, such as the Trefis High Quality Portfolio, often offer a smoother ride and potentially superior risk-adjusted returns over the long term.
Looking ahead, financial projections suggest a 5% year-over-year revenue growth for SLB in 2025, reaching $38.1 billion. The projected EPS is $3.56, leading to a revised valuation of $48 per share based on a 13.6x P/E multiple. This valuation suggests a potential upside compared to the current market price, indicating a positive outlook for the stock. While short-term challenges remain, the long-term prospects for SLB appear promising, underpinned by the company’s leading market position, global presence, and strong financial foundation.
While the near-term outlook for upstream investment growth in the oil and gas industry remains cautious due to global oversupply concerns, SLB anticipates a gradual correction in the supply imbalance. The company foresees robust long-term investment growth driven by several factors, including increasing energy demand, particularly from emerging technologies such as AI and data centers, a renewed emphasis on energy security, and significant investments in key regions like the Middle East and offshore markets. These factors provide a supportive backdrop for SLB’s long-term growth trajectory. Furthermore, comparing SLB’s performance against its peers on key metrics provides valuable insights into the company’s competitive positioning and relative strengths within the industry. This comparative analysis offers investors a more comprehensive understanding of SLB’s investment potential.
