Today’s news:
• Schlumberger (SLB) reported a fourth-quarter earnings and revenue beat.
• My article today: “Make More Profit with Apple Stock During the Next Market Correction”
Schlumberger NV (SLB – yield 5.1%) reported strong fourth-quarter results this morning, and the stock is up 1.5% in morning trading to 39.37.
Revenue of $8.2 billion came in slightly higher than the consensus estimate of $8.15 as international drilling demand continued to outshine North American demand. Adjusted earnings per share (EPS) of $0.39 beat the consensus estimate of $0.37, reflecting cost cutting, restructuring of operations and improving margins.
Looking ahead, the slowdown in U.S. shale production and the OPEC+ production cuts are expected to support oil prices. International energy producers are therefore expected to increase capital expenditures, benefitting Schlumberger, which is the world’s largest oilfield service company.
Schlumberger CEO Olivier Le Peuch commented, “Overall performance was positive—particularly in the international markets—and we generated $2.7 billion in [full-year 2019] free cash flow, which was a remarkable achievement under these market conditions. International revenue, excluding Cameron, grew 8% and was consistent with our expectations of high single-digit growth. Compared with the first half of 2019, international pretax segment operating margin improved by 100 basis points (bps) in the second half of the year—a firm step toward our strategic target of margin expansion.
“In contrast, after two years of strong growth, North American revenue fell sharply, driven largely by the land market weakness affecting our OneStim® pressure pumping business, as customers reached their budget limits earlier in the year and remained highly disciplined on capital spend.”
Management expects improvement in free cash flow, North American margins and international revenue growth in 2020.
It will be about 10 days before I have Wall Street’s updated earnings estimates for Schlumberger for 2020. Based on statements in today’s press release, I expect those numbers to increase a bit from recent projections.
As for the stock, SLB is resting near 40 after a two-month run-up, and appears capable of rising to 45 in the coming months, where it last traded in April 2019. Alternately, a pullback in the broader stock market would temporarily bring the share price down to 36.5 (or lower). Buy.
I periodically publish articles on the Cabot website. Please take a look at today’s article, Make More Profit with Apple Stock During the Next Market Correction. It’s not really about Apple; it’s about actively managing your stocks so that you have cash with which to buy low during a stock market pullback. I simply use AAPL as an example within the article.
We’re due for a pullback in the broader stock market. I’m NOT saying that the market is overvalued. I’m NOT saying that I expect the pullback to arrive next week, nor to last for many months. I’m simply saying—which I cite in the article—that the S&P 500 index is up almost 9% during its most recent run-up, and it needs to take a breather by coming down a bit and resting.
Forewarned is forearmed, right? Raise cash between now and the next market pullback. You’ll see in the article that I bought AAPL shares three times in 2019, during the three biggest share price pullbacks that the stock experienced. That wasn’t luck—that was active portfolio management, and I couldn’t have done it if I hadn’t raised cash in advance of the pullbacks. (I never trade on margin.) There’s no reason why you can’t strategically accomplish something similar, thereby boosting your portfolio returns.
Please send me questions if you’re thinking of doing something new or different with your stocks, and I’ll be happy to give you input.