Schlumberger Has $86 Upside And $54 Downside On Drilling Declines, Susquehanna's Minervino Says

Susquehanna Financial Group recently issued a report on Schlumberger Limited SLB after reports that industry-wide drilling activity has continued to decline. Analysts at Susquehanna rate Schlumberger as Positive and lowered their price target from $88 to $86.

Analysts Charles Minervino and Kai Wang wrote, "We are lowering our 2016-2017 EPS estimates for Schlumberger as drilling activity and commentary by E&Ps on North America and International spending continue to come in at levels that are even weaker than previously expected. We revised our 2016 EPS estimate to $1.47 from $2.06 and our 2017 EPS estimate to $1.95 from $2.65."

Analysts at Susquehanna gave two key takeaways from their most recent analysis.

1. North American Exposure

Susquehanna issued a new financial forecast for Schlumberger with 2016 revenues expected to decline 48 percent and EBIT margin of 2.9 percent vs 5.5 percent previously. These updated forecasts reflect the continued pricing pressure of oil, particularly in North America where there is a large oversupply of the commodity.

2. Global Exposure

Analysts noted that while the oil industry may continue to decline, Schlumberger is the one of the oil companies best positioned to weather the drilling downcycle. This is due to its exposure in the Middle East where spending hold ups better and the company's development of strong customer relationships.