Schlumberger May Lag Street Ests – Analyst Blog

Schlumberger Limited (SLB) may face trouble meeting this year’s Wall Street profit forecast, the company’s chief executive officer (CEO) said yesterday. He also said that rising natural gas drilling in North America will not lead to “satisfactory returns” this year.

 

The consensus EPS estimate for this year is $2.93, which is on the high side and would require a very strong second half year to achieve, the CEO stated. The first half may face some hindrances due to severe weather conditions in Russia, Eastern Europe and the North Sea.

 

Additionally, Schlumberger’s ongoing review procedure of its well services operations will lead to some one-time costs this year, which may negatively impact the bottom line. However, it will help the company in future and position it for better performance.

 

We believe that recent discoveries around the globe, increased exploration and production (E&P) spending and an uptrend in oil prices will likely keep oilfield activity strong. However, natural gas weakness is expected to persist in the near term.

 

While near-term concerns remain in place, we believe that Schlumberger is well positioned for growth over the next several years with best-in-class return on invested capital − which we believe will continue to gain momentum following the Smith acquisition − along with excellent product lines, strong management and a diverse geographic footprint. We are currently Neutral on Schlumberger shares.