SLB Third-Quarter Earnings Report Overview

SLB, formerly known as Schlumberger Limited (ticker: SLB), maintained a steady financial performance in its third-quarter earnings report, with CEO Olivier Le Peuch and CFO Stephane Biguet providing insights on the company's operations and future outlook.

Despite flat revenue at $9.2 billion, the company achieved its highest adjusted EBITDA margin since Q1 2016 at 25.6% and reported a strong free cash flow of $1.81 billion.

The Digital & Integration division saw a revenue increase driven by digital sales, while Production Systems revenue grew due to higher sales in North America and the Middle East. However, Well Construction revenue experienced a decline due to lower rig counts. The company anticipates muted revenue growth in Q4 but remains committed to returning at least $4 billion to shareholders in 2025.

Key Takeaways

• SLB's Q3 revenues held steady at $9.2 billion with an increase in adjusted EBITDA margin to 25.6%.
• Free cash flow was robust at $1.81 billion, with a significant increase in digital sales.
• The company expects muted Q4 revenue growth but maintains a positive outlook for 2025.
• SLB plans to exceed its shareholder return commitment, aiming to return at least $4 billion in 2025.
• The Palliser asset sale and the ChampionX acquisition are strategic moves to strengthen the company's portfolio.

Company Outlook

• SLB projects low to mid-single-digit growth in international upstream spending for 2025, with flat to slightly down spending in North America.
• The company targets adjusted EBITDA margins to remain at or above 25% for the full year 2024.
• Digital initiatives, including the Lumi platform, are expected to contribute to long-term growth beyond 2025.

Bearish Highlights

• Well Construction revenue declined due to lower U.S. land rig counts and completed offshore projects.
• An unfavorable technology mix led to a 53 basis point contraction in margins.
• Q4 growth may be muted due to E&P budget exhaustion in U.S. land and cautious international spending.

Bullish Highlights

• Production Systems revenue increased, driven by sales in North America and the Middle East & Asia.
• Free cash flow performance was strong, with $2.4 billion generated from operations.
• The company is optimistic about offshore FIDs, digital growth, and maintaining high customer satisfaction.

Misses

• Despite overall steady performance, the company experienced decreased evaluation revenue in Latin America and the Middle East.
• There was a 19 basis point decline in Well Construction margins.

Q&A Highlights

• SLB is on track to exceed the 50% free cash flow return goal to shareholders, with a potential increase in this percentage.
• The company is well-positioned to navigate market fluctuations with a strong digital business focus.
• SLB's digital growth is largely uncorrelated with upstream spending, indicating resilience in a potentially flat CapEx environment.

In conclusion, SLB's third-quarter earnings call painted a picture of resilience and strategic focus, leveraging digital capabilities to drive future growth and committing to substantial shareholder returns despite challenging market conditions.

InvestingPro Insights

SLB's steady financial performance in Q3 2023 is reflected in robust InvestingPro metrics. The company's market capitalization stands at $59.19 billion, underlining its significant presence in the oil services sector. SLB's revenue growth of 12.4% over the last twelve months aligns with reported strong performance, particularly in Digital & Integration and Production Systems divisions.

InvestingPro Tips highlight SLB's financial strength and shareholder-friendly policies. The company has maintained dividends for 54 consecutive years, demonstrating a long-term commitment to shareholder returns. This aligns with SLB's goal of returning at least $4 billion to shareholders in 2025. Additionally, SLB operates with moderate debt and has liquid assets exceeding short-term obligations, which supports strong free cash flow generation.

The company's P/E ratio of 13.48 and adjusted P/E ratio of 12.43 suggest reasonable stock valuation, given its growth prospects and market position. However, SLB is trading at a high P/E ratio relative to near-term earnings growth, with a PEG ratio of 1.65, which investors should consider amid projected muted Q4 revenue growth.

Full transcript – SLB Q3 2024 Earnings Conference Call
Operator: Welcome to the Third Quarter SLB Earnings Conference Call. All participants are in listen-only mode. This conference is being recorded. We would now like to turn the conference over to James R. McDonald, Senior VP of Investor Relations and Industry Affairs.

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This article was generated with AI support and reviewed by an editor. See T&C for more.