Melius reiterates SLB stock Buy rating citing international strength

Melius reiterated a Buy on SLB with a $70 price target versus a $56.23 share price, citing the company as best positioned for an upturn in E&P spending thanks to its international breadth, offshore/deepwater strength, and digital offerings. SLB also reported Q1 2026 EPS of $0.52, in line with expectations, on revenue of $8.72 billion, slightly above forecasts. Near-term earnings may be pressured by Middle East conflict-related disruptions, but the firm sees solid earnings and cash flow growth into the end of the decade.

Analysis

The market is rewarding SLB not just for cyclicality, but because it is the cleanest lever to a non-US capex re-acceleration at a time when geopolitics is forcing customers to diversify away from concentrated Middle East supply. That matters because international and offshore work tends to be stickier and higher margin than North American activity, so any incremental spending shift should show up disproportionately in mix and cash conversion rather than just topline. The second-order winner is likely the broader offshore supply chain: subsea, riser, and deepwater equipment vendors should see earlier order visibility if final investment decisions are being pulled forward into Africa and other non-Middle East basins.

The near-term risk is that the stock is increasingly pricing a multi-quarter narrative before the earnings base fully catches up. Conflict-driven disruption can inflate pipeline expectations, but it also creates timing slippage, so the next 1-2 quarters may look less linear than the stock suggests. If Middle East activity normalizes faster than expected, or if customers defer sanctioning after a temporary pull-forward, the market could de-rate the “2027 exit rate” story quickly.

The best contrarian angle is that the move may be underestimating how much of SLB’s upside is already in the quality premium. A business with perceived durability, dividend history, and digital exposure often gets bid ahead of actual revisions, which reduces forward multiple expansion from here unless estimates inflect materially. In other words, the fundamental setup is constructive, but the easy money may now belong to higher-beta laggards in offshore services rather than SLB itself.

Key Decisions for Investors

• Hold core long SLB for 3-6 months, but trim into strength if it approaches the analyst target and the stock remains disconnected from revisions; upside from here looks more estimate-dependent than multiple-dependent.
• Pair trade: long SLB / short a domestically exposed oilfield services name for 1-2 quarters to express the international/offshore mix advantage and reduce beta to a broad energy tape.
• Buy call spreads on SLB 3-6 months out rather than outright equity if you want upside to a delayed capex cycle; the implied move should compress once the market realizes this is a timing story, not a straight-line rerate.
• Prefer long exposure to offshore/deepwater beneficiaries on any SLB-led rally; if FIDs are truly being pulled forward, the second-order winners may outperform SLB on order growth and operating leverage.
• Use a 1-2 quarter stop if Middle East-related disruption eases and SLB guidance does not reaccelerate; the key downside is a narrative gap between current pricing and actual cash flow realization.