What stock of oil and gas products / services is a better investment?

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Schlumberger Limited (SLB) provides reservoir, drilling, production and processing characterization technologies to the oil and gas industry worldwide. The Paris, France-based company operates in four divisions: Digital & Integration; Tank yield; Construction of wells; and production systems. By comparison, Baker Hughes Company (BKR) in Houston, Texas, offers a portfolio of technologies and services around the world. The company operates through four segments: Oilfield Services (OFS); Oilfield Equipment (OFE); Turbomachinery and Process Solutions (TPS); and Digital Solutions (DS).

The increase in oil and gas extraction activities in recent years has resulted in an increase in demand for oil and gas products and services globally. In addition, the need for technological advancements in drilling and the adoption of new techniques are major factors driving the growth of the oil and gas equipment industry. Global Oilfield Equipment Market Expected To Reach $ 144.43 Billion In 2027, Growing at a CAGR of 2.8%. SLB and BKR should continue to benefit from favorable industry winds.

SLB has gained 23.5% in price in the past nine months, while BKR has returned 11.4% in this period. Additionally, SLB’s 29.7% year-to-date gains compare to BKR’s 14.8% returns. In terms of last year’s performance, BKR is the winner with 57.6% gains compared to 48.4% for SLB.

But which stock is a better buy now? Let’s find out.

Latest developments

On September 8, SLB agreed with EnerVenue to deploy the latter’s unique nickel-hydrogen battery technology to advance the large-scale deployment of nickel-hydrogen battery technology in select global markets. This approach should enable SLB to emerge as one of the long-term leaders in energy transition infrastructure in the industry.

On September 14, BKR and C3 AI (AI) successfully deployed the BHC3 production optimization enterprise AI application at MEG Energy, an energy company based in Alberta, Canada, to enhance its operational capabilities. “This is an exciting deployment, as BakerHughesC3.ai solutions now serve MEG Energy’s technological and operational excellence goals with enterprise-wide and domain-specific AI,” said Uwem Ukpong, Executive Vice President of Regions, Alliances and Corporate Sales at BKR.

Recent financial results

SLB revenue increased 5% year-on-year to $ 5.63 billion in the fiscal second quarter ended June 30. Its adjusted EBITDA was $ 1.20 billion, up 43% from the same period last year. Its non-GAAP net income increased 525% from its value a year ago to $ 431 million. The company’s non-GAAP EPS increased 500% year-over-year to $ 0.30.

For the second quarter, ended June 30, BKR’s revenue increased 9% year-on-year to $ 5.14 billion. Its Adjusted EBITDA increased 38% from a year ago to $ 611 million, while its adjusted net income improved 367.7% year-on-year to $ 83 million. dollars. The company’s adjusted EPS improved 300% year-on-year to $ 0.10.

Past and expected financial performance

EBIT and SLB revenues have declined at CAGRs of 14.3% and 12.4%, respectively, over the past three years. Additionally, SLB’s EPS has declined 20.4% per year over the past five years. Analysts expect the company’s revenue to grow 10.5% in the current quarter and 11.3% in the next quarter. However, its turnover is expected to decline 2.6% in the current year. The company’s EPS is expected to grow 118.7% in the current quarter, 77.3% in the next quarter and 85.3% in the current year.

By comparison, BKR’s EBIT has grown at a CAGR of 6.7% over the past three years, while its revenues have declined by 2.5% over this period. In addition, his EPS has declined by 33% per year for the past five years. However, analysts expect BKR’s revenue to grow 5.6% in the current quarter, 4.6% in the next quarter, and 1.6% in the year in Classes. The company’s EPS is expected to grow 425% in the current quarter, 542.9% in the next quarter and 2,333.3% in the current year.

Profitability

BKR is more profitable with gross margin and FCF margins of 17.93% and 8.18%, respectively, compared to 13.49% and 5.79% for SLB.

However, SLB’s ROA and ROTC of 3.04% and 4.44%, respectively, compare to BKR’s 2.07% and 3.10%.

Evaluation

In terms of advance VE / Sales, SLB is currently trading at 2.30x, which is 47% higher than BKR, which is currently trading at 1.22x. Additionally, SLB’s forward EV / EBITDA ratio of 10.87 is 12.3% higher than BKR’s 9.53.

So, BKR is a relatively affordable stock here.

POWR odds

SLB and BKR both have an overall C rating, which equates to Neutral in our POWR odds system. POWR scores are calculated taking into account 118 separate factors, each factor being weighted to an optimal degree.

Both stocks have a C Momentum rating. This is justified because SLB and BKR are trading above their respective 50-day moving averages.

Both stocks have a stability rating of C due to their beta above 1. SLB has a beta of 1.37, while BKR has a beta of 1.33.

Of the 42 actions of Energy – Services industry, SLB is ranked No. 6. Alternatively, among the 93 stocks of the Energy – Oil and gas industry, BKR is ranked No. 36.

Beyond what we’ve stated above, we’ve also rated stocks for stability, momentum, value, and growth. Click here to view SLB ratings. Also get all BKR ratings here.

The winner

Both stocks reported strong financials in the last quarter, but neither looks like a good bet now given their weaker-than-industry financial data. So, we think it might be wise to wait for better entry points.

Our research shows that the chances of success increase when investing in stocks with an overall strong buy or buy rating. See all the top rated stocks in the Energy – Services sector here. Also, here to view the highest rated stocks in the Energy – Oil & Gas sector.


Shares of SLB were trading at $ 27.22 per share on Monday morning, down $ 1.09 (-3.85%). Year-to-date, SLB has gained 26.34%, compared to a 16.96% increase for the benchmark S&P 500 over the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After obtaining a master’s degree in economics, she acquired knowledge in equity research and portfolio management at Finlatics. Following…

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