On Thursday, Citi updated its stance on SLB (NYSE: SLB), adjusting the price target to $62 from the previous $65 while sustaining a Buy rating on the stock. The firm's interaction with the company provided insights into recent market trends, confirming their second-quarter EBITDA estimate of $2.2 billion, which aligns with the consensus, and an EPS forecast of 82 cents. They anticipate a recovery in Drilling & Measurements (D&I) margins to nearly 30% and an increase in Production Systems (PS) margins towards 15%.
For the third quarter, Citi has revised its North America (NAM) revenue growth expectations for SLB to a 1% increase, factoring in a decline in U.S. onshore activity but expecting gains from operations in the Gulf of Mexico (GOM) and Canada. SLB has recently affirmed their core EBITDA compound annual growth rate (CAGR) of 20% and projected that the acquisition of Cameron (NYSE: CAM) will be accretive post-deal closure.
Citi has incorporated the Cameron transaction into their financial model, leading to the establishment of a 2025 adjusted EBITDA prediction of $11.05 billion and an EPS of $3.94. The revised outlook takes into account a dip in U.S. revenues and an increased share count, which results in a 3% decrease in the 2025 EPS forecast. However, they project a 2% rise in 2026 EPS to $4.46, as they expect the company to realize greater synergies.
The firm believes that SLB is well-positioned to continue outperforming its peer Halliburton (NYSE: NYSE:HAL), especially in light of concerns about a potential downturn in the second half of the year for HAL and the continued robustness of the industry overseas.
In other recent news, Schlumberger Limited (NYSE:SLB) has been in the spotlight with several key developments. Notably, Benchmark maintained a Buy rating on SLB shares, highlighting the stock's low valuation as a possible catalyst for a rebound. The firm's analysis indicates that SLB's fundamentals, including the integration of Champion X, support a higher stock price. Additionally, RBC analysts have praised SLB's $8.2 billion acquisition of CHX, maintaining an "Outperform" rating and raising their price target from $66.00 to $69.00.
On another front, SLB secured an expanded contract with Equinor for the second stage of Phase 3 at the Troll field in the North Sea. The project is expected to expedite the subsea tieback to existing infrastructure, further establishing SLB OneSubsea’s position as a key supplier in the region.
In compliance news, the U.S. State Department confirmed that SLB is operating within the boundaries of sanctions imposed on Russia, stating that the firm understands the "guard rails" of the sanctions policy.
InvestingPro Insights
As Citi maintains a positive outlook on SLB, real-time data from InvestingPro reinforces the company's financial health and market position. SLB's market capitalization stands at a robust $66.08 billion, with a P/E ratio of 15.27, suggesting the stock is trading at a reasonable valuation relative to its earnings. The company has also demonstrated a solid revenue growth of 13.02% over the last twelve months as of Q1 2024. Additionally, SLB has maintained its commitment to shareholders, boasting a history of 54 consecutive years of dividend payments, a testament to its financial stability and investor confidence.
InvestingPro Tips highlight SLB's low price volatility, providing a relatively stable investment option. Moreover, analysts predict the company will remain profitable this year, with profitability already established over the past twelve months. While SLB does face challenges with weak gross profit margins, the company operates with a moderate level of debt, which could be a sign of prudent financial management.
For investors seeking a deeper analysis, InvestingPro offers additional tips on SLB, which can be found at: https://www.investing.com/pro/SLB. Use the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription for more exclusive insights. With 7 additional InvestingPro Tips available, investors can gain a comprehensive understanding of SLB's potential risks and opportunities.
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