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Stifel reiterates Buy rating on Schlumberger shares despite underperformance

EditorRachael Rajan
Published 10-06-2024, 07:32 pm

On Monday, Stifel reaffirmed its Buy rating and $64.00 price target on Schlumberger Limited (NYSE:SLB), a leading provider in the oilfield services sector.

Schlumberger's stock has experienced downward pressure since early April, leading to its current valuation at 8.0 times the estimated 2024 EBITDA and 6.9 times the 2025 EBITDA. These figures stand below the ten-year median multiple of 9.8 times.

The firm's analysis indicates that Schlumberger's shares are trading at a discount relative to historical valuations. Specifically, the stock is currently valued at 0.53 times the S&P 500 multiple, a notable decrease from 0.68 times at the beginning of the year on January 1, 2024, and well below the ten-year median of 0.79 times.

In other recent news, Schlumberger Limited (SLB) has been making significant strides in the energy sector. The company recently completed an $8.2 billion acquisition of CHX, a move analysts from RBC praise as a strategic fit, maintaining an "Outperform" rating and raising their price target from $66.00 to $69.00. The acquisition is expected to enhance SLB's portfolio and exposure to future growth markets, with projected synergies of $400 million suggesting potential upside from future efficiency gains in both costs and revenues.

SLB has also secured an expanded contract with Equinor for the second stage of Phase 3 at the Troll field in the North Sea. This expansion builds on a pre-existing long-term agreement and aims to expedite the subsea tieback to existing infrastructure. SLB's OneSubsea joint venture will utilize North Sea's compliant, configurable solutions to accelerate the production of approximately 55 billion standard cubic meters of gas from the reservoir.

The U.S. State Department has confirmed that SLB is operating within the boundaries of sanctions imposed on Russia, stating that the firm understands the "guard rails" of the sanctions policy after discussions with the company's CEO. SLB has been aiding Russian oil companies like Gazprom (MCX:GAZP) Neft and Rosneft in maintaining oil and gas production, in line with the regulations set by the Office of Foreign Assets Control (OFAC) and the Treasury.

In the first quarter earnings call, SLB reported a robust beginning to 2024, with a 13% revenue increase and a mid-teens EBITDA growth. The company anticipates continued international growth and improved adjusted EBITDA margins in the upcoming quarters.

InvestingPro Insights

As Stifel maintains a bullish stance on Schlumberger Limited (NYSE:SLB), a closer look at the real-time data from InvestingPro enriches the analysis of the company's current market position. Schlumberger's market capitalization stands at $63.68 billion, reflecting its significant presence in the oilfield services sector. Despite concerns over valuation, the company's P/E ratio is at a reasonable 14.66, slightly below the adjusted P/E ratio for the last twelve months as of Q1 2024, which is 14.52. This suggests a stable valuation in the eyes of investors.

Revenue growth also appears robust, with a 13.02% increase over the last twelve months as of Q1 2024, which aligns with the company's historical performance trends. The dividend yield of 2.47% as of June 2024, coupled with a record of maintaining dividend payments for 54 consecutive years, underscores Schlumberger's commitment to returning value to shareholders. These figures reinforce Stifel's optimistic outlook and may signal to investors that Schlumberger's stock is undervalued at its current trading price near the 52-week low.

Two notable InvestingPro Tips for Schlumberger highlight the company's low price volatility and its moderate level of debt, which may offer a degree of stability in an otherwise fluctuating market. Furthermore, Schlumberger's profitability over the last twelve months and analysts' predictions for continued profitability this year provide additional confidence in the company's financial health. For those interested in a deeper analysis, there are additional InvestingPro Tips available that can further guide investment decisions. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription for more exclusive insights.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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