We Remain Very Positive On Schlumberger’s Outlook Despite Estimate Cuts, Says Griffin

In a research report published today, Griffin Securities analyst Kevin Simpson maintained coverage with a Buy rating on Schlumberger (NYSE:SLB) and a $40 price target. 

Simpson commented: “We are again cutting our EPS estimates from $5.68 to $5.60 for 2014 and from $6.80 to $6.60 for 2015. Our 3QE is reduced from $1.51 to $1.47 and our 4Q14E is cut from $1.60 to $1.55. Most of the cut is a function of lower expectations for SLB’s large Russia business (estimated 6- 7% of total EBIT in 2013) in the wake of the more restrictive sanctions imposed by the US and EU that were announced last week and are effective as of 9/26. The ratcheting up of restrictions on financing for more Russian oil companies and broader equipment and technology sanctions will likely pull activity there lower than we had expected.”

The analyst added, “Notwithstanding the estimate cuts, we remain very positive on SLB’s outlook and we reiterate our Buy rating. There is more than sufficient strength in other key markets to allow the company to grow at attractive rates even assuming that Russia results will be lower for multiple quarters if sanctions remain in place or are tightened further. We look for particularly strong growth in the US, Saudi Arabia, other Arab Gulf states, Mexico, Brazil and Australia.”

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