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SLB posts Q1 earnings beat, sees softening oil demand in US

Shares of Schlumberger Limited (SLB) are dipping slightly on Friday as the oil drilling operator posted its first-quarter earnings, beating Wall Street revenue expectations for the quarter but disappointing on its failure to truly capitalize on the recent jump in oil prices.

Yahoo Finance Anchors Julie Hyman and Madison Mills break down the latest development for the company and what it could mean for the stock moving forward.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Nicholas Jacobino

Video transcript

MADISON MILLS: We're going to move on to our trending tickers for the day. We're going to start with shares of SLB. The company noting favorable exposure to the international markets, meeting analyst expectations for the first quarter. But SLB reaffirming its full year guidance, and noting softness in North America being offset by upside in international markets. Shares are down a little over 2%, as we head into the close here.

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And what's interesting here about SLB is, as we were saying, it disappointed the street that they weren't able to capitalize on the increase in the price of crude that we've seen over the past three months, here with crude jumping 13% in the first quarter. That's the highest jump in the past two years. So not only were there already high expectations for all of the names that we're seeing this earnings cycle, but also when you have a jump like that in crude, the streets are going to be expecting you to deliver.

JULIE HYMAN: Yeah, exactly. But they did have that weakening, softening demand here in the US in the shale areas. It's interesting because I think of what we just heard Alex Morris talking about a little while ago, that if the crude price climbs high enough, then we will see an uptick in production from the US shale producers. You have to wonder what's something like that's going to mean for SLB, but that's not, that's not what they're seeing right now, and that's not built into their forecast.

The company also said it, like many of the big energy companies, it's going to return capital to shareholders $7 billion worth over the next two years-- $3 billion this year, $4 billion next year. Maybe that is cushioning some of the downside that we're seeing in the stock today. Something we should also mention, SLB is the first of the big oil services companies to report, so we'll keep an eye to see if this does portend something for the others.

One more thing just context wise I want to mention, the S&P energy index, of course, is up this year. It's the leading group. It's up, what about, 13% in line with oil prices, by the way. But SLB is one of only four energy stocks in the index to have fallen this year. So it's just interesting that we're seeing some of the oil services companies not do as well as the E&P companies.

MADISON MILLS: That's a really good point.

JULIE HYMAN: [? Exportation ?] and production.