Dahlman Rose Raises Estimates on Schlumberger (SLB)

Dahlman Rose & Co. is out with a research report this afternoon, where it reiterates its Buy rating on Schlumberger ltd

; it has a $95.00 price target on the stock. The Dahlman Rose analysts said, “Schlumberger's (

) North American results were the key driver that pulled earnings ahead of our forecast for 2Q10. On the heels of larger North American EBIT margin expansions during the quarter among its peers that ranged from ~14-20%, 10% EBIT margins may have disappointed the market. Relative to more spot-levered peers, SLB has a greater mix of long-term contracts and less pressure pumping exposure, which leads to a slower turn in their numbers during inflections in the cycle.” They added, “As SLB continues to restructure its North American overhead, management has guided that it will catch up to peer margins into the end of the year. Continued strength in the North American market may provide a fertile environment for SLB to improve results into the end of the year.” The DR analysts further noted, “Management reiterated their bullish guidance for a slow and steady second half recovery in 2H10, with the caveats that the Gulf of Mexico moratorium and slower activity in Mexico may temper expectations. Management has not assumed a recovery of offshore drilling activity in the Gulf of Mexico in 2010, but their tone appears to share our view that the moratorium will not be extended and regulations will be set to allow for an expansion of activity in 2011. SLB continued to see increased international activity, including offshore projects, into the 2H10, albeit with a stronger acceleration anticipated in 4Q10.” They closed by saying, “We maintain the upward trajectory of our forecast across geographic regions to incorporate the recovery of the upstream investment cycle, but we are increasing our estimates to reflect a higher EBIT margin run rate, particularly in North America. We are raising our EPS forecasts for 2010 to $2.89 from $2.76 and 2011 to $4.47 from $4.27.”