Jefferies Lowers Estimates, Price Target For Schlumberger, Says 'Near Term Downside Is Presumably Significant'

In a report published Tuesday morning, analysts at Jefferies lowered their EPS estimates and price target for Schlumberger Limited. SLB, after the company reported better-than-expected earnings last week.

The firm now expects EPS of $3.80 and $3.90 in 2015 and 2016, respectively, down from the previous $5.00 and $5.90. Moreover, the new price target was set at $80, down from $89, contemplating fair value, but also "presumably significant" near-term downside (derived from the burden of "hot spots" like Russia and Schlumberger VZ), as well as the "longer term cost (but maybe not enough benefit)" of the Schlumberger Production Management (SPM) division.

Further explaining its new price target, Jefferies’ report said that analysts believe that substantial cuts to consensus estimates for all OFS (Oil Field Services) companies will be seen over the next one to three months, "and replicating the past would suggest SLB shares could easily trough below $60 (~15x trough earnings)."

Related Link: Schlumberger To Acquire $1.7 Billion Stake In Eurasia Drilling Company

The Oil Field Services Group

In relation to the industry group in which Schlumberger is comprised, Jefferies noted, "SLB kicks off an earnings season likely to yield significant cuts to 2015-16 EPS for all OFS. This has catalyzed the group down in downcycles past but can also (then) reset OFS investing after the sell-off."