On Monday, Citi adjusted its outlook on Schlumberger Limited (NYSE: NYSE:SLB), a leading oilfield services company, by reducing its price target from $70 to $65, while still recommending the stock as a Buy. The revision comes after Schlumberger's shares experienced a downturn last Friday, prompted by skepticism over the company's ability to meet its full-year guidance, despite management's reaffirmation of their mid-teens EBITDA growth target.
The analyst from Citi noted that the most significant alteration to their forecast involves a decrease in Digital & Integration (D&I) margins, now expected to be around 30.5% for the year, down from the previous estimate of approximately 33%.
Adjustments were also made to the Well Construction segment, with margin projections lowered by about 120 basis points, leading to a slight year-over-year decline. Furthermore, North American revenues are now anticipated to decrease by 1%, a shift from the previously projected 1% growth.
These changes have led to a reduction in the firm's full-year earnings per share (EPS) estimate for Schlumberger by $0.08 to $3.48, which is slightly below the consensus estimate of $3.53. The analyst pointed out that while the resumption of share buybacks in the second half of the year, following the shareholder vote on the Cameron International Corporation (CHX) merger, should be beneficial, putting an end to estimate reductions is critical for Schlumberger's investment story.
In addition to the adjustments in financial projections, the analyst highlighted several factors that could positively impact Schlumberger's performance. These include the growth of the Saudi rig count projected into 2025, potential improvements in Well Construction margins in the latter half of the year, and the influence of higher gas prices on the company's results.
InvestingPro Insights
Following Citi’s revised outlook on Schlumberger Limited (NYSE: SLB), it is worth noting that the company's financial health and market performance can be further illuminated with insights from InvestingPro. With a market capitalization of $71.25 billion and a P/E ratio of 16.62, Schlumberger is trading at a valuation that reflects its current earnings. The company's revenue growth over the last twelve months as of Q1 2024 stands at an impressive 14.2%, with a gross profit margin of nearly 20%. This demonstrates a solid operational performance despite the downward adjustments in Citi's forecasts.
An InvestingPro Tip highlights that Schlumberger has been able to maintain dividend payments for an impressive 54 consecutive years, indicating a strong commitment to returning value to shareholders. Furthermore, analysts predict the company will remain profitable this year, which is corroborated by its profitability over the last twelve months. For investors seeking stability, another InvestingPro Tip points out that Schlumberger's stock generally trades with low price volatility, which may appeal to those looking for less turbulent investment options.
For readers interested in gaining a deeper understanding of Schlumberger's investment potential, additional InvestingPro Tips are available, offering insights such as the company's operational efficiency and debt management. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and access the full suite of 7 additional InvestingPro Tips tailored to Schlumberger’s financial outlook and stock performance.
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