Earnings Preview: Schlumberger - Analyst Blog
20 Abril 2011 - 10:21AM
Zacks
The world’s largest oilfield services provider
Schlumberger Ltd. (SLB) is scheduled to report its
first quarter 2011 results on April 21, 2011, before the start of
trading.
The Zacks Consensus Estimate for the to-be-reported quarter is a
profit of 77 cents per share (with a downside risk of 1.3%) on
revenues of $9.0 billion. In the year-ago quarter, Schlumberger
recorded a gain of 62 cents per share, while sales came in at $5.6
billion.
Fourth Quarter Recap
Schlumberger’s fourth-quarter 2010 results came in better than
expected, helped by strong activity in the liquids-rich plays in
North America and overall improvement in Canada.
Earnings per share, excluding special items, came in at 85
cents, beating the Zacks Consensus Estimate of 77 cents and were
comfortably ahead of the year-ago adjusted profit of 67 cents.
Revenues of $9.1 billion were approximately 58.0% greater than
what was achieved during the fourth quarter of 2009 and also
surpassed the Zacks Consensus Estimate of $8.8 billion.
(Read our full coverage on this earnings report: Schlumberger's
4Q Profit Soars)
Points to Ponder for First Quarter
Schlumberger enjoys a strong competitive position within the
global oilfield services markets. It provides a broad range of
services and solutions to the exploration and production sector,
including drilling fluids, directional drilling and real-time
drilling analysis, and project management. In the near term,
Schlumberger is likely to benefit from bullish U.S. land drilling
trends, where activity is above expectations.
The key negative, in our view, is the company’s recent assertion
that March quarter results will be adversely affected by abnormally
seasonal weather and disruptions in the Middle East/North Africa
markets. The aggregate impact could lower Schlumberger’s first
quarter earnings by as much as 10 cents a share.
(Read our full coverage on this story: Schlumberger Fears a Dull
Q1)
Agreement of Analysts
As a result of the above-mentioned factors, there has been a
downward bias among the analysts regarding Schlumberger’s outlook.
In particular, we see a notable number of estimate revisions over
the past 30 days.
Out of the 31 analysts covering the stock, 24 have revised their
estimates downward for the first quarter of 2011, while none have
gone in the opposite direction.
Magnitude of Estimate Revisions
Consequent to analysts revising estimates southward over the
past 30 days, the Zacks Consensus Estimate for the quarter has gone
down by 5 cents (from 82 cents to 77 cents).
Surprise History
The company has a history of positive earnings surprises,
surpassing/meeting the Zacks Consensus Estimate in each of the last
4 quarters. Schlumberger has performed consistently during this
period with its average earnings surprise being 4.5%. This implies
that the company has beaten the Zacks Consensus Estimate by 4.5%
over the last four quarters.
As such, we will not be surprised if Schlumberger reports
better-than-expected results, yet again, particularly after
Halliburton Co. (HAL) – the second-largest member
of the oilfield services contingent – led off reporting for the
group by coming out with robust numbers despite the turmoil in the
Middle East and Africa.
Our Recommendation
Schlumberger shares currently retain a Zacks #3 Rank, which
translates into a short-term Hold rating. We are also maintaining
our long-term Neutral recommendation on the stock.
We like Schlumberger’s leading position in the global oilfield
services market, along with its broad and technologically-complex
product and service offerings, and its robust financial profile.
Since the last few quarters, the company has been benefiting from
increased activity in the unconventional oil and gas shale plays in
North America, which have more than made up for the drop in
deepwater Gulf of Mexico activity.
However, the oilfield services sector’s biggest player continues
to feel pressure from intense competition in the market, depressed
natural gas prices and the expected curtailment in incremental
drilling projects.
As such, we see the stock performing in line with the broader
market and prefer to remain on the sidelines.
HALLIBURTON CO (HAL): Free Stock Analysis Report
SCHLUMBERGER LT (SLB): Free Stock Analysis Report
Zacks Investment Research
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