Last Thursday, Schlumberger Limited. (NYSE: SLB) reported stronger-than-expected earnings for the first quarter. Several analysts weighed in on the results.
Related Link: Schlumberger Q1 Profit Tops Views, Shares Gain
Morgan Stanley: Overweight, $110 price target
According to the firm’s report, the company showed confidence that its first quarter international resilience will be repeated, “highlighting that it is the third inning of its transformation with much runway ahead.” Schlumberger also showed itself confident on its latest technology, “willing to put up the capital for refracturing work and be paid back in production.”
Analysts at Morgan Stanley highlight that (1) the company’s margin resiliency can be seen as a “true sign of its superior organizational structure;” (2) “Lower capital intensity and surprisingly strong FCF [are] further signs of operational excellence;” (3) a deep pocketed company offers to fund “cash-strapped E&Ps;” (4) the macro outlook remains quite constructive, but the recovery in services is expected to be slow.
RBC Capital Markets: Outperform, $104 price target
According to the research note, the “strong first quarter provided evidence that the company's relentless focus on execution is paying off during the downturn, and earnings are unlikely to fall as severely as some were expecting.”
The firm expects Schlumberger's margins well above its peer group, and “more performance based contracts [where] reward exceeds risk.” They add that “SLB believes deepwater still represents a huge resources base for the industry, but costs need to be reduced and recovery rates need to increased to make projects more competitive.”
BMO: Outperform, $110 price target
The analysts highlight the biggest company-specific takeaway: “current trough EPS is likely to be 25-30% higher than 2009. This is primarily driven by internal initiatives focused on efficiency that are unlikely to be replicated by peers and should continue to improve given that SLB’s transformation is in just the ‘third inning.'”
Latest Ratings for SLB
|Apr 2015||BMO Capital||Maintains||Outperform|
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