This energy stock is trading near its lowest valuation on record. How to trade it using options

Schlumberger (SLB), a leading oilfield services provider, reported strong Q1 2025 results, including a 25.3% adjusted EBITDA margin, and raised its 2025 guidance to 15% revenue growth and $3.50 EPS. Despite headwinds from slow global oil demand growth and stagnating U.S. shale activity, SLB's resilience is driven by its diversified international revenue base (60%), digital transformation, and strategic partnerships like the ADNOC contract. The company is enhancing shareholder value via a $3 billion buyback and 2.3% dividend yield, even as the stock trades at a forward P/E of 13 and valuation multiples near historical lows, with upcoming Q2 earnings projected to show a year-over-year decline.

Analysis

Schlumberger (SLB) presents a compelling dichotomy between strong corporate fundamentals and a challenging macroeconomic backdrop. The company demonstrated operational strength in Q1 2025, evidenced by a 120 basis point year-over-year expansion in its adjusted EBITDA margin to 25.3% and a subsequent upgrade to its full-year 2025 guidance, now projecting 15% revenue growth and an EPS of $3.50. This performance is underpinned by a diversified portfolio with 60% of revenue from more resilient international markets, efficiency gains from its DELFI digital platform, and long-term revenue security from major contracts like the $7.8 billion ADNOC deal. Furthermore, SLB is actively enhancing shareholder value through a $3 billion share buyback and a 2.3% dividend yield, supported by $1.2 billion in free cash flow. Despite these positives, the stock faces significant headwinds. The company's fortunes are intrinsically linked to oil prices, which have been weak amid slowing global demand growth of just 1.2% and stagnating U.S. shale activity, where rig counts have fallen 5% year-over-year. This pressure is reflected in sell-side estimates for the upcoming Q2 earnings, which project a year-over-year decline in both revenue (over 6%) and EPS (11.6%). This has led to a valuation disconnect, with SLB's forward P/E of 13 trading below peers like Halliburton and overall valuation multiples nearing historic lows. The technical picture is mixed, with short-term indicators flashing buy signals while the stock remains in a longer-term downtrend below its 150-day moving average, albeit having stabilized since its April lows.

Key Decisions for Investors

• Given that Schlumberger's valuation multiples are near historical lows and its forward P/E ratio is at a discount to peers, investors could consider the current price an attractive entry point, supported by the company's strong free cash flow and shareholder return programs.
• It is critical to monitor the upcoming July 18 earnings report for any deviation from the projected year-over-year declines in revenue and EPS, as this will be a key catalyst influencing the stock's direction.
• While the stock has stabilized, it remains in a longer-term downtrend; a patient approach is warranted, and investors could consider options strategies, such as selling puts, to capitalize on sideways price action or enter a position at a lower effective cost basis.