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Schlumberger Stock Slides Despite Upbeat Q4

The news shaping the markets today

Japan’s au Jibun Bank composite PMI fell to 48.8 in January, from a final reading of 51.8 a month ago. The latest reading signalled the first contraction in the private sector since September 2021, exerting pressure on the JPY/USD forex pair.


Australia’s services PMI declined to 45 in January, from 55.1 in the previous month. This represented the first contraction in four months and sent the AUD/USD pair lower in forex trading this morning.


Taiwan’s unemployment rate rose to 3.72% in December, from 3.71% in the prior month. The news exerted significant pressure on the TWD/USD forex pair.


Eurozone’s consumer confidence indicator came in little changed at -8.5 in January, versus market expectations of -9.0. Despite this, the EUR/USD pair declined in forex trading this morning.


Statistics Canada predicted a 2.1% decline in the country’s retail sales from a month ago. However, the CAD/USD forex pair remained elevated.

 

What’s happening: Shares of Schlumberger fell on Thursday, despite the company reporting upbeat results for its fourth quarter.

What happened: Schlumberger reported year-on-year growth in both revenues and earnings for the fourth quarter.

The world’s largest oilfield services firm managed to beat Q4 estimates due to a recovery in global oil drilling.

How were the results: Schlumberger reported growth in revenues and earnings for the fourth quarter, with both figures exceeding market estimates.

  • Revenues climbed around 13% year-over-year to $6.22 billion, surpassing Street expectations of $5.34 billion.
  • Net income came in at $601 million, or 42 cents per share, compared to $374 million, or 27 cents per share in the year-earlier quarter.
  • Excluding onetime items, adjusted net income was 41 cents per share, higher than the consensus estimate of 34 cents per share.

Why it matters: Crude oil gained around 50% last year and has continued its uptrend this year. Oil prices reached seven-year highs amid a strong rebound in energy demand and supply-related issues.

Baker Hughes reported a 42% year-over-year rise in the global rig count to 1,563 at the end of the fourth quarter. The company’s CEO Olivier Le Peuch projected oil demand surpassing pre-pandemic levels before the yearend, provided there are no further covid-related restrictions.

Schlumberger’s revenues in North America climbed 10% from a year ago and international revenue grew 13%, driven by growth in Africa and Europe. The company also divested some North American businesses last quarter.

CEO Schlumberger said during the call, “Looking ahead into 2022, the industry macro fundamentals are very favorable, due to the combination of projected steady demand recovery, an increasingly tight supply market, and supportive oil prices. We believe this will result in a material step up in industry capital spending with simultaneous double-digit growth in international and North American markets.”

The Houston, Texas-based company projected capital spending between $1.9 billion and $2 billion for 2022, compared to just under $1.7 billion in the previous year. The company is also looking to boost North America spending by at least 20%.

With the increased spending, Schlumberger kept its dividend flat at 12 cents per share, despite generating free cash flows of about $3 billion in 2021.

How shares responded: Shares of Schlumberger fell 1.9% to close at $36.36 on Friday. Increased spending, a decline in oil prices and profit taking may have exerted pressure on the stock. The company’s shares have jumped over more than 23% over the past six months.

What to watch: Investors will keep an eye on crude prices and rig count. Markets will also monitor rising covid-19 cases, which remains a threat to the recovery in global energy demand.

The markets today

The British pound will be in focus today ahead of PMI data from the country

 

Context: The GBP/USD forex pair declined on Friday, reaching its weakest level in more than one week.

Details: The pound has lately been on an uptrend due to higher expectations of the Bank of England hiking its benchmark interest rate next month in a bid to combat rising inflation.

After UK’s inflation climbed to its highest level in around 30 years in December, money markets began factoring in a rate hike of 25 bps (basis points) in February and of over 100 bps in 2022.

Meanwhile, Prime Minister Boris Johnson has been facing growing calls to resign after attending parties during the covid-19 lockdown. However, it is unlikely that Johnson will step down.

Economic data caused some investor concerns. UK’s retail sales contracted by 3.7% month-over-month in December, the steepest decline since January 2021. The latest figures also came in weaker than the consensus estimate of a 0.6% decline.

The GBP/USD forex pair fell more than 0.3% to settle at 1.3553 on Friday, reaching its lowest level in over one week. The pound also weakened versus the euro, after hitting a 23-month high in the prior session. The sterling fell around 0.5% to 83.68 pence against the euro on Friday.

What to watch: Traders await data on composite PMI, manufacturing PMI and services PMI from the UK today. The IHS Markit/CIPS manufacturing PMI is expected to decline to 57 in January, from 57.9 in December, while the services PMI is projected rise to 54.8 in January, from 53.6 in the previous month.

Other Markets: European indices closed lower on Friday, with the FTSE 100, Dax 40, CAC 40 and STOXX Europe 600 down by 1.20%, 1.94%, 1.75% and 1.84%, respectively.

Support & resistances for today

Technical Levels News Sentiment
Nikkei 225 – 27,264.34 and 27,438.34 Negative
Dow Jones – 34,209.75 and 34,384.12 Positive
GBP/USD – 1.3547 and 1.3553 Negative
EUR/GBP – 0.8363 and 0.8366 Positive
Copper – 4.5304 and 4.5382 Negative

Market snapshot

What else to watch today

France’s composite PMI, manufacturing PMI and services PMI, Germany’s composite PMI, manufacturing PMI and services PMI, Eurozone’s composite PMI, manufacturing PMI and services PMI, Central Bank of Brazil’s focus market readout, Mexico’s mid-month inflation rate, Canada’s manufacturing sales, US Chicago Fed National Activity Index, composite PMI, manufacturing PMI and services PMI, as well as Argentina’s leading economic index.


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