Yahoo Finance What Are Schlumberger’s Management Views for 2016?
Is Schlumberger Looking Attractive after the Cameron Acquisition?
What does Schlumberger’s CEO think?
Schlumberger’s (SLB) management is maintaining its crude oil market outlook from the previous quarter. The company believes upstream companies will continue to reduce spending on exploration and drilling. In its fiscal 1Q16 earnings press release, SLB’s chairman and CEO (chief executive officer) Paal Kibsgaard commented, “Recent spending surveys for 2016 now indicate sharper declines than previously forecasted. Global spending reductions in 2016 are approaching 25%, corresponding to reductions between 40% to 50% in North America and around 20% internationally.”
What is Schlumberger’s outlook?
Schlumberger’s management has provided lower fiscal 2Q16 revenue guidance based on weakness in the energy market and activity reductions in Venezuela. Kibsgaard commented in the fiscal 1Q16 conference call, “Excluding the additional revenue from Cameron, this market outlook together with our decision to reduce activity in Venezuela could lead to a sequential percentage fall in revenue for the second quarter, similar to what we saw in Q1. Cameron revenue on the other hand is expected to be flat sequentially.”
Analysts’ targets for Schlumberger
The lowest analyst target price for Schlumberger is $70, while the highest is $110. The median target price, as surveyed by sell-side analysts, is $89.50. Schlumberger is currently trading near $78, implying a ~15% upside to its median price. Carbo Ceramics (CRR), Schlumberger’s peer, received a $13.50 median target price. Against its current price of ~$12, this implies a 12% upside. SLB is 1.2% of the iShares S&P 500 Value (IVE). Energy makes up 12.9% of IVE.
Goldman Sachs adds Schlumberger to ‘conviction buy’ list
On May 23, 2016, Goldman Sachs (GS) added Schlumberger to its “conviction buy” list for a target price of $94. This implies a ~21% return over the next 12 months.
Next, we’ll look at Schlumberger’s business model and why the company remains strong despite energy market weakness.
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