Citi has adjusted its financial outlook for Schlumberger Limited (NYSE: NYSE:SLB), the oilfield services company, by lowering its price target to $60 from the previous $62.
The firm sustained a Buy rating on the stock, despite the revision.
The decision comes in light of anticipated slower growth in upstream spending, which is expected to impact the company's revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA).
Citi revised its third-quarter revenue estimate for Schlumberger down by 1% to $9.2 billion and cut its EBITDA forecast by 1.5% to $2.284 billion. This adjustment includes other income, bringing the EBITDA to $2.33 billion, which is slightly below the consensus estimate of $2.36 billion.
For the fourth quarter, the firm anticipates nearly a 2% decrease in revenues to $9.42 billion and more than a 2% reduction in EBITDA to $2.4 billion, or $2.45 billion with other income, compared to the consensus of $2.54 billion.
Looking further ahead into 2025, Citi expects Schlumberger to continue growing, albeit at a modest rate of approximately 4.5% internationally and remaining flat in North America.
The firm projects revenues, inclusive of Cameron International Corporation (CHX), at $41.7 billion and EBITDA at $10.52 billion, or $10.75 billion with other income. These projections fall short of some estimates that include CHX contributions.
In other recent news, significant developments have transpired at Schlumberger Limited (SLB). The company's third-quarter revenue is projected to grow by 1% sequentially to $9.23 billion, according to JPMorgan's analysis.
The firm also anticipates an improvement in EBITDA margins for the fourth quarter, with revenue expected to increase by 2.5% sequentially to $9.46 billion. SLB's focus on margin improvement through cost optimization measures, digital adoption, and targeting higher margin opportunities remains unwavered despite a cautious outlook due to anticipated softer spending trends.
SLB has also announced the launch of 'Lumi,' a platform that combines artificial intelligence with the company's industry-specific workflows and data. In collaboration with NVIDIA (NASDAQ:NVDA), SLB aims to expedite the creation of AI solutions tailored to the energy industry. Furthermore, the company has expanded its partnership with Aramco (TADAWUL:2222) to develop digital solutions aimed at reducing greenhouse gas emissions in Saudi Arabia.
However, SLB's proposed acquisition of ChampionX, valued at $7.75 billion, has been delayed due to a request for additional information from the U.S. Department of Justice.
On a positive note, the company reported robust second-quarter earnings for 2024, exceeding expectations with an adjusted earnings per share of $0.85 and an adjusted EBITDA margin of 25%.
InvestingPro Insights
While Citi has adjusted its outlook for Schlumberger, recent data from InvestingPro provides additional context to the company's financial position. Schlumberger's market capitalization stands at $59.56 billion, reflecting its significant presence in the oilfield services sector. The company's P/E ratio of 13.52 suggests a relatively modest valuation compared to its earnings, which aligns with Citi's view that the current stock price may not fully reflect the company's potential.
InvestingPro Tips highlight that Schlumberger has maintained dividend payments for 54 consecutive years, demonstrating a strong commitment to shareholder returns despite industry fluctuations. This consistency is particularly noteworthy given Citi's revised outlook and the anticipated slower growth in upstream spending. Additionally, the company's liquid assets exceed short-term obligations, indicating a solid financial position that could help weather potential industry headwinds.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide valuable insights into Schlumberger's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.