SLB (SLB) is a top dog in the Oil Services industry group and a member of the elite IBD Big Cap 20. The stock has vacillated wildly across a 5% buy zone of a cup base, giving investors reason to watch from the sidelines while another base forms.
SLB, formerly known as Schlumberger, changed its name on Oct. 24, 2022, to rebrand as a lower-carbon energy company.
The “L” in CAN SLIM investing strategy stands for “leader”, looking for top performers in the highest-ranked industry groups. SLB fills the bill as the No. 1 member of the Oil & Gas-Field Services group, which is ranked second out of the 197 IBD industry groups. This sector has jumped from 34th place just four weeks ago.
SLB specializes in technology for energy innovation, including improving performance in the oil and gas industry, working to reduce emissions and accelerating the transition to low-carbon energy. It offers solutions to remove methane and flaring emissions as part of their decarbonizing services.
The oil and gas segment includes equipment and rigs for well construction while SLB drilling tools are used in shale drilling, also known as fracking. Their geo-energy services find applications in building, heating and cooling systems.
SLB’s energy storage technology is used for battery energy storage systems (BESS). They also provide clean hydrogen technology and sustainable lithium production.
Oil Services Stock Wavered From Buy Zone
In October, SLB gapped up 10.3% in heavy volume and broke out of a cup base, hitting the 49.93 buy point after reporting better-than-expected Q3 EPS and sales. Shares of the oil services stock have been trading sideways in choppy action since the breakout.
Price action has ranged from being extended from the buy zone in mid-November, to triggering the 7% sell rule about two weeks ago. As a result, it may be best to put SLB on your watchlist and wait until it calms down and forms a new base, before deploying your capital.
Shares are up over 70% YTD.
Earnings Growth Forecast To Continue
EPS growth has accelerated in the last three quarters, up 75% in Q3 after 67% and 62% spurts in Q2 and Q1. Analysts project annual EPS growth of 68% this year and 39% in 2023.
Sales also saw accelerating growth, up 28% in Q3, up from 20% and 14%. Pretax operating margin grew to 23.5% in Q3, from 22.6% in the prior quarter.
Finally, the stock could benefit from the Inflation Reduction Act passed in August, earmarking $425 million for states to enhance clean energy planning and implementation for families, businesses and communities.
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