SLB (SLB) is one of the best S&P 500 stocks Friday after the oilfield services company beat top- and bottom-line expectations for its fourth quarter, raised its dividend payout and announced a $2.3 billion accelerated share repurchase program.
In the three months ending December 31, SLB revenue increased 3.3% year over year to $9.3 billion. Its earnings per share (EPS) were up 7% from the year-ago period to 92 cents.
"2024 was a strong year for SLB as we successfully navigated evolving market conditions to deliver revenue and EBITDA [earnings before interest, taxes, depreciation and amortization] growth, margin expansion and solid free cash flow," said SLB CEO Olivier Le Peuch in a statement.
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Le Peuch also noted that adjusted EBITDA grew 12% year over year and the company generated nearly $4 billion in free cash flow, which enabled SLB "to return $3.27 billion to shareholders and reduce net debt by $571 million."
The results beat analysts' expectations. Wall Street was anticipating revenue of $9.2 billion and earnings of 90 cents per share, according to MarketWatch.
SLB's shareholder-friendly moves
"Given our confidence in the business outlook and our ability to continue generating strong cash flows, we are pleased to announce that our Board of Directors has approved a 3.6% increase to our quarterly dividend," Le Peuch said.
SLB’s new quarterly dividend rate is 28.5 cents per share and the first payment will come on April 3 to shareholders of record at the close of business on February 5.
Le Peuch added that because the company believes its stock is undervalued at current, levels "we entered into accelerated share repurchase (ASR) transactions to repurchase $2.3 billion of our company's common stock."
Under the accelerated share repurchase program, which SLB entered into on December 20, it received 80% of the shares on January 13 and expects the remainder of the shares to be purchased no later than the end of May 2025.
Stock buybacks are another way for corporations to boost value for shareholders. As Kiplinger contributor Mark Hake explains in his piece on "What Is a Stock Buyback," a company "that buys back its shares will produce a higher stock price because as its shares count falls, it forces the price higher."
Hake goes on to explain "that effect produces more value for shareholders, as they pay no taxes on this unrealized gain (until they sell shares)."
Is SLB stock a buy, sell or hold?
SLB has lagged the broader market over the past 12 months, down 13% on a total return basis (price change plus dividends) vs the S&P 500's 26% gain. Yet Wall Street remains bullish on the energy stock.
According to S&P Global Market Intelligence, the average analyst target price for SLB stock is $53.73, representing implied upside of more than 20% to current levels. Additionally, the consensus recommendation is a Buy.
Financial services firm Jefferies is one of the more bullish outfits on SLB with a Buy rating and a $61 price target.
"With its significant scale, we believe SLB is poised to benefit from continued strengthening business dynamics driven by increased demand on an expected momentum in international activity (Middle East in focus)," wrote Jefferies analyst Lloyd Byrne in a January 3 note. "Overall, we expect continued industry-leading margins, robust FCF and solid shareholder returns in the upcoming years."
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