Stifel Says Schlumberger's Q2 Results, International Market Conditions Support Bullish View

Schlumberger Limited. SLB last week reported solid second-quarter results and management indicated they were comfortable with the consensus expectations for the third quarter.

The company is likely to generate strong free cash flow and continue its disciplined capital spending approach, according to Stifel.

The Analyst

Stifel’s Stephen Gengaro maintained a Buy rating for Schlumberger with a price target of $50.

The Thesis

Schlumberger seems poised to benefit from improving international market conditions and is expected to minimize new SPM investments, while working to monetize its SPM portfolio, Gengaro said in the note.

The company reported second-quarter EPS at 35 cents, broadly in line with expectations and driven by a strong international performance and operating income of $968 million.

Although there was some confusion following the conference call, management indicated it was comfortable with the third-quarter EPS consensus estimate of 42 cents, Gengaro mentioned.

Among the key positive takeaways, the analyst cited Schlumberger’s strong international revenue growth, up 8.5% sequentially and 7.9% year-on-year. The company guided to 7-8% international revenue growth in 2019.

Backed by strong operating free cash flow and expectations of three divestitures, management projected over $1 billion in cash and indicated that the current dividend would be maintained.

Price Action

Shares of Schlumberger traded around $38.88 at the time of publishing.

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