On Wednesday, Citi adjusted its financial outlook on shares of Schlumberger Limited (NYSE: NYSE:SLB), a leading oilfield services company. The firm's analyst revised the price target downward to $50.00 from the previous $53.00 while sustaining a Buy rating on the stock.
The revision reflects concerns over a deceleration in upstream capital expenditures. Currently trading near its 52-week low of $38.66, SLB maintains a perfect Piotroski Score of 9, according to InvestingPro data, suggesting strong financial health despite market pressures.
The analyst noted that the expected slowdown in capital spending is becoming more pronounced, prompting a reduction in earnings forecasts for SLB. For the fourth quarter, the firm has slightly decreased its EBITDA estimate to $2.33 billion, or $2.39 billion when adjusted, due to lower activity in Mexico.
Consequently, the earnings per share (EPS) projection for the quarter has been modestly reduced to 89 cents, a one-cent decline. The company's trailing twelve-month EBITDA stands at $8.13 billion, with a moderate P/E ratio of 12.34. InvestingPro's Fair Value analysis indicates the stock is currently undervalued.
Looking ahead to the first quarter of 2025, the firm anticipates a more substantial impact on SLB's financial performance. The adjustments include the removal of CHX from the forecasts, as the deal is expected to close by the end of the first quarter.
The anticipated slowdown in upstream spending is more severe than the usual seasonal patterns, influenced by factors such as Saudi rig suspensions, a continued deceleration in Mexico, and broader concerns regarding crude oil prices in 2025.
As a result of these factors, the revenue forecast for the first quarter has been lowered to $8.47 billion, with EBITDA expected to be $1.88 billion, or $1.92 billion when adjusted. Citi has also revised its full-year 2025 EBITDA estimate for SLB, inclusive of three quarters of CHX contributions, to $9.14 billion, or $9.34 billion when adjusted.
The full-year EPS forecast has been set at $3.08. These adjustments reflect the firm's updated expectations in light of the evolving industry dynamics and their anticipated impact on SLB's financial performance.
In other recent news, SLB has secured a contract from bp for the supply of a subsea boosting system for the deepwater Kaskida project in the U.S. Gulf of Mexico. This contract marks the first engineering, procurement, and construction agreement between SLB's OneSubsea joint venture and bp, aiming to maximize production from the Kaskida field.
In financial news, SLB's third-quarter earnings report showed revenues of $9.2 billion, with an adjusted EBITDA margin of 25.6%. Several financial firms have adjusted their outlook on SLB's shares. TD Cowen has lowered its price target from $68.00 to $65.00, while maintaining a Buy rating.
Susquehanna has reduced its price target to $56 from $60, but kept a positive rating on the stock. Stifel also trimmed its price target for SLB to $60, maintaining a Buy rating, and Citi reduced its target to $54 while keeping a Buy rating.
SLB has demonstrated a commitment to shareholder returns, repurchasing over $500 million worth of shares in the third quarter. Furthermore, the anticipated sale of the Palliser property in Canada is expected to help SLB exceed its return targets, with projections now set to surpass the $3.0 billion mark in 2024 and its $4.0 billion target in 2025. These are among the recent developments surrounding SLB.
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