Investing

Schlumberger Now That Much More Attractive, With Other Buyout Candidates Highlighted

Investors need to keep in mind that Halliburton Company (NYSE: HAL) and Baker Hughes Inc. (NYSE: BHI) still have their hands tied as far as them being involved in the near-term M&A story. They are also taking a while to secure approval.

24/7 Wall St. went back to a research report from early in August from Credit Suisse’s Focus List review. The firm had an $89 price target on Schlumberger at the time. The firm continued its Outperform rating and said:

In the current downturn, Schlumberger demonstrated its ability to optimize margins and cash flow generation even in a down market, making the metrics on the eventual recovery significantly more attractive. Last year at its investor meeting, Schlumberger laid out its plans for a transformational effort at what is the biggest, and historically best Oilfield Services company in the industry.

It was the business plan that the CEO presented in his quest for the top job and investors are now seeing the impact of its implementation. Few thought that a company of its reputation, efficiency, and technology needed such a transformation, but the pursuit changed from just maintaining its technology leadership to regaining its return and profitability leadership. This quarter demonstrated what a significant effort and result could be. The stock has gone from being somewhat fairly valued to being cheap again.

Wells Fargo had an Outperform rating on both Cameron and Schlumberger. Their report said a strong strategic fit is here that may drive more oil services and equipment transactions. They said:

We believe that the transaction represents an excellent strategic transaction for Schlumberger and our initial rough estimate is that the deal could be approximately 3% to 4% accretive in 2016 and 5% to 7% in 2017.

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Schlumberger shares were down 5.4% at $68.60, and Cameron was up 40% at $59.56. Here is how the reaction was on the day in these key stocks, with late-day prices right before Wednesday’s closing bell.

  • FMC Technologies, Inc. was up 6% at $30.50, against a consensus analyst target of $40.00 and against a 52-week range of $27.94 to $62.00.
  • Dril-Quip, Inc. was up 6.5% at $59.95, versus a $75.50 consensus target price and against a 52-week range of $53.37 to $102.00.
  • Forum Energy Technologies, Inc. was up 2.4% at $12.72, with a consensus analyst target of $18.19 and a 52-week range of $8.34 to $34.39.
  • Weatherford International was up 2.5% at $8.20. Its consensus analyst target was $14.43 and it has a 52-week range of $7.21 to $23.98.
  • National Oilwell Varco was last seen up 3.8% at $38.76. It has a consensus analyst target of $45.10 and a 52-week range of $34.54 to $86.55.