Schlumberger (SLB) Lower Stock Price Expected Due To Declines In Oil Price

Consensus Estimate for third-quarter earnings is pegged at 90 cents per share, implying growth of 12.8% from the year-ago reported number.

Oil prices tumbled to their lowest since early October due to a weaker demand outlook and easing fears of a supply disruption amid the Iran-Israel conflict. While geopolitical tensions could continue to lend some support and prevent sharper declines, sluggish economic growth in the euro zone and China suggests a volatile and potentially bearish outlook for crude prices in the near term.

If we looked at the crude oil futures we are seeing that it is trading below both 50 and 200 day MA, which suggest that we might see weaker oil price movement.

This might affect SLB stock price despite they might report a better earnings.

The options market overestimated SLB stocks earnings move67%of the time in the last 12 quarters.The predicted move after earnings announcement was±3.3%on average vs an average of the actual earnings moves of3.0%(in absolute terms).

The implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls.

The implied volatility for downside puts is increasing relative to upside calls, this suggests the market is pricing in a larger fear to a downside move.

The Current Skew Indicator is showing Slightly Bearish.

I am expecting SLB to show some adjustment to its share price when the oil price futures start to take a dip, we could be seeing energy stocks picking up.

Appreciate if you could share your thoughts in the comment section whether you think SLB would be posting a surprise and help to push the energy sector up.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.