Is This the Quarter Schlumberger Turns It Around?

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Schlumberger Ltd. (NYSE: SLB) is scheduled to release its fourth-quarter financial results before the markets open on Friday. The consensus estimates are calling for $0.37 in earnings per share (EPS) and $8.15 billion in revenue. The same period of last year reportedly had $0.36 in EPS and $8.18 billion in revenue.

CEO Olivier Le Peuch, who replaced Paal Kibsgaard on August 1, warned in September that Schlumberger would take such a writedown in the third quarter as the company shifted from its former strategy of taking equity positions in oil and gas assets and adopting a “focus on the company’s strength in digitization of oil and gas exploration and development.”

Without going into specifics, Le Peuch also said that current market valuations and the implementation of the new strategy mean that Schlumberger would take noncash impairment charges related to goodwill, intangible assets and fixed assets when it reported third-quarter results.

In the third quarter, the company took a $12.7 billion pretax charge that it said was “driven by market conditions. This charge is almost entirely noncash and primarily relates to goodwill, intangible assets, and fixed assets.” On a GAAP basis, Schlumberger posted a net loss of $11.38 billion ($8.22 per share). Adjusted pretax net income in the quarter totaled $596 million, down from $644 million in the same period a year ago.

Hopefully, the fourth quarter will be better.

Overall, Schlumberger stock has underperformed the broad markets, down 8% in the past 52 weeks. However, the share price is actually up 17% in the past quarter.

Here’s what analysts said about Schlumberger ahead of the report:

  • Bernstein has an Underperform rating.
  • Wells Fargo has an Overweight rating and a $44 target.
  • Stifel’s Buy rating comes with a $47 target price.
  • Citigroup rates it as Buy with a $43 target price.
  • Deutsche Bank has a Buy rating and a $42 price target.

Shares of Schlumberger traded at $38.50 on Thursday, in a 52-week range of $30.65 to $48.88. The consensus price target is $42.60.


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