Where Will Schlumberger Go Next?

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With shares of Schlumberger (NYSE:SLB) trading around $76, is SLB an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Schlumberger is the supplier of technology, integrated project management and information solutions to the international oil and gas exploration and production industry.  It operates through three groups: Reservoir Characterization, Drilling, and Production. Energy resources are valuable to consumers and businesses as well as essential to global growth. Energy is present in the daily lives of most consumers and companies worldwide. For those not yet affected by energy, their time will surely come soon enough. As the world dependence on energy continues and will continue, companies like Schlumberger stand to see consistent profits.

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T = Technicals on the Stock Chart are Strong

Schlumberger stock has been range-bound for most of the last few years. Currently, the stock is struggling to make significant progress but has managed to remain positive for the year. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Schlumberger is trading slightly above its rising key averages which signal neutral to bullish price action in the near-term.

SLB

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Schlumberger options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Schlumberger Options

23.47%

0%

0%

What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

May Options

Flat

Average

June Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Schlumberger’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Schlumberger look like and more importantly, how did the markets like these numbers?

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2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

-3.09%

-2.60%

11.46%

7.14%

Revenue Growth (Y-O-Y)

7.39%

8.78%

11.13%

16.34%

Earnings Reaction

-1.47%

4.26%

-1.06%

1.0%

Schlumberger has seen mostly increasing earnings and revenue figures over the last four quarters. From these figures, the markets have been mixed about Schlumberger’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Schlumberger stock done relative to its peers, Baker Hughes (NYSE:BHI), Halliburton (NYSE:HAL), Walter Energy (NYSE:WLT), and sector?

Schlumberger

Baker Hughes

Halliburton

Walter Energy

Sector

Year-to-Date Return

9.91%

14.87%

24.13%

-51.03%

13.64%

Schlumberger has been an average relative performer, year-to-date.

Conclusion

Schlumberger provides essential energy products and services to consumers and companies operating around the world. The stock has not see much movement in recent years but may be getting ready to head higher. Earnings and revenue figures have mostly been increasing but investors have grown to expect more from the company. Relative to its peers and sector, Schlumberger has been an average performer. WAIT AND SEE what Schlumberger stock does this coming quarter.

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