Schlumberger Slips After Quarterly Profit Falls Sharply From Last Year
Shares of Schlumberger (SLB) fell after the company's quarterly profit fell 68% from the year-ago period, with a revenue decline driven by the acquisition of Cameron earlier this year.
WHAT'S NEW: After the market close yesterday, Schlumberger reported Q3 earnings per share, excluding Cameron merger and integration charges, of 25c on revenue of $7.02B, compared to analysts' expectations for 22c and $7.08B, respectively. The company's adjusted EPS and revenue figures for the quarter represent year-over-year declines of 68% and 17%, respectively. Looking ahead, the company reaffirmed its capital expenditure guidance view of $2B for fiscal 2016, including three quarters of CapEx for the acquired Cameron businesses.
EXECUTIVE COMMENTARY: In a statement, Schlumberger chairman and CEO Paal Kibsgaard said the company maintains that a "broad-based V-shaped recovery is unlikely given the fragile financial state of the industry," but noted that the company does see activity upside in 2017 in North America land, the Middle East, and Russia markets. Kibsgaard also commented that "visibility remains limited" in terms of 2017 E&P investment. On its quarterly earnings conference call, Schlumberger said that it plans to shift its focus from maintaining its presence in drilling to gaining market share for its drilling business on North American land. The company noted that there is a "clear path" to profitability in U.S. drilling in particular, but added that the industry is currently in a period of oil oversupply. The company added that fracking remains dilutive to earnings and that it expects global drilling activity to further pick up in 2017.
WHAT'S NOTABLE: Schlumberger's Q3 report comes a day after rival Halliburton (HAL) reported Q3 EPS than beat analysts' estimates, driven primarily by increased utilization in North America, as well as "effective" global cost and working capital management.
STREET RESEARCH: Following Schlumberger's report, Stephens analyst Matthew Marietta maintained an Overweight rating on the stock with an $87 price target and said he continues to view Schlumberger as a top oilfield services pick as the Cameron integration moves forward and as focus on the free cash flow generation heightens through its diverse geo-region exposure and expansive product/service portfolio. Marietta noted, however, that each of the company's geographic operating regions declined quarter-over-quarter. Davidson analyst Sonny Randhawa kept a Buy rating and $100 price target on Schlumberger, saying that the company's cost management "saves the day" despite the "drag" of the Cameron integration. The analyst added that the company's cost reduction efforts in the quarter were highlighted by "exceptional" incremental and decremental margin performance.
PRICE ACTION: In late morning trading, Schlumberger fell 3.3% to $80.24.
OTHERS TO WATCH: Shares of Halliburton are lower by about 0.6% this morning, while Baker Hughes (BHI), which Halliburton failed to acquire this year, also declined. Baker Hughes is expected to report its quarterly earnings next week.
Disclosure: None.