Lower Schlumberger Price Targets Cloud Oil Services Sector Recovery Prospects

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Schlumberger Ltd. (NYSE: SLB) has performed horribly in 2018, and the small gain after Friday’s earnings announcement has been followed by even more selling pressure. It turns out that many analysts on Wall Street are still keeping their formal ratings while handily trimming their official price targets and estimates for the oil services giant. These calls weighed on many oil services companies, and it may be muting some of the expected recovery in 2019 as oil prices have retreated handily from their September highs.

The 24/7 Wall St. take on Friday was that Schlumberger’s earnings cleared a low bar, but that sentiment has been followed by more analysts trimming their price targets. Schlumberger also was in Monday’s top analyst upgrades and downgrades montage, which represents many of the major daily analyst calls.

Credit Suisse maintained Schlumberger as Outperform after earnings, but the firm lowered earnings estimates and it lowered its target price to $71 from $82. Credit Suisse thinks that Schlumberger set very realistic and achievable expectations for the next few quarters and sees what is very credibly described as an improving global market. Onshore U.S. fracking is seeing continued pricing pressure and lower utilization, while drilling and other services continue to do well. International onshore and shallow markets continued to improve, and the bias for pricing in 2019 is clearly higher. The firm now believes that no M&A is being planned other than Eurasia Drilling Company, and it expects a dividend hike around the fourth-quarter earnings report.

Merrill Lynch still has a Buy rating on Schlumberger, but it lowered its price objective to $71 from $73 ahead of Monday. The firm continues to be attracted to the services giant, noting its best-in-class portfolio of technology that should translate into market share gains. The call also talks up international recovery gaining momentum in 2019.

Schlumberger closed up four cents at $58.47 on Friday, but late Monday morning it traded down 2.9% at $56.79. The stock’s prior 52-week range was $57.59 to $80.35, with the low put in on Friday, but now the 52-week low is shown as $56.17.

Several other key analyst calls have been seen from Monday as well, but only the price target data was worth noting:

  • Cowen lowered its Schlumberger price target marginally, to $75 from $77.
  • Susquehanna lowered its target price to $72 from $75.
  • JPMorgan lowered its target price to $73 from $74.

Also worth noting was that CFRA (S&P Global) issued a Sell rating after last Friday’s earnings report, and its Schlumberger price target is only $63.

The VanEck Vectors Oil Services ETF (NYSE: OIH) was last seen trading down 1.6% at $22.89, in a 52-week range of $22.68 to $29.87. By some counts, this exchange traded fund could be called “The Schlumberger ETF” because the stock has close to 20% of the entire fund’s weighting. Halliburton has roughly 15% of the weighting, but the rest of the largest components all have only about 4% to 5%, as follows: Transocean, Tenaris, TechnipFMC, National Oilwell Varco, Core Laboratories, Baker Hughes, Helmerich & Payne and Patterson-UTI.

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