Stifel trims SLB stock target, maintains Buy rating

Stifel, a financial services firm, adjusted its price target for SLB (NYSE: SLB), a leading oilfield services company.

The price target was reduced to $60.00 from $62.00, with the firm retaining a Buy rating on the stock. The decision follows the examination of SLB's third-quarter results for 2024, fourth-quarter guidance, and the outlook for 2025.

SLB's recent financial outcomes and forecasts have been indicative of a company poised for sustained growth and strong free cash flow (FCF) in the coming years. Despite a deceleration in international growth rates, Stifel's analysis suggests that SLB is in a strong position to achieve solid growth. The firm's confidence is further supported by the expected financial benefits from the sale of the Palliser property in Canada.

The sale is anticipated to help SLB exceed its return targets, with projections now set to surpass the $3.0 billion mark in 2024. Moreover, there is an increased confidence in SLB's capability to exceed its $4.0 billion target in 2025. These projections are significant as they represent the company's financial goals and its ability to generate shareholder value.

Stifel's commentary emphasizes the favorable risk/reward balance for SLB's shares, suggesting that the company's stock remains an attractive investment. The analyst's statement underscores a positive outlook on SLB's financial health and strategic moves, which are expected to yield robust free cash flow and enhance returns in the near future.

In other recent news, Schlumberger Limited (NYSE:SLB) has been the subject of several analyst revisions. Citi reduced its price target on SLB to $54 while maintaining a Buy rating, citing deceleration in upstream spending growth. The firm also adjusted SLB's fourth-quarter EBITDA projection to $2.36 billion.

On the other hand, Raymond James lowered its SLB target to $57, but kept an Outperform rating. Goldman Sachs (NYSE:GS) reaffirmed its Conviction Buy rating on SLB with a steady price target of $52, while Barclays (LON:BARC) adjusted its SLB target to $61, down from $63, but maintained an Overweight rating.

SLB reported steady financial performance in its third-quarter earnings, with revenues of $9.2 billion and an adjusted EBITDA margin of 25.6%. The company's Digital & Integration division saw a revenue increase, driven by digital sales.

However, Well Construction revenue experienced a decline due to lower rig counts. Despite a more cautious spending environment in the oil sector, SLB has shown commitment to shareholder returns, repurchasing over $500 million worth of shares in the third quarter.

InvestingPro Insights

To complement Stifel's analysis, recent data from InvestingPro provides additional context on SLB's financial position and market performance. As of the last twelve months ending Q3 2024, SLB reported a revenue of $35.99 billion, with a notable revenue growth of 12.4%. This aligns with Stifel's view on the company's growth trajectory, albeit with some potential for deceleration in international markets.

SLB's financial health is further underscored by its profitability, with a gross profit margin of 20.42% and an operating income margin of 17.24% over the same period. These figures support the company's ability to generate strong free cash flow, as highlighted in Stifel's report.

InvestingPro Tips also reveal that SLB has maintained dividend payments for 54 consecutive years and has raised its dividend for 3 consecutive years. This consistent dividend policy aligns with the company's projected ability to return cash to shareholders, as mentioned in Stifel's analysis.

It's worth noting that SLB's P/E ratio stands at 13.48, which could be considered relatively modest given its growth prospects. However, one InvestingPro Tip cautions that the stock is trading at a high P/E ratio relative to near-term earnings growth, with a PEG ratio of 1.65.

For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide deeper insights into SLB's investment potential.

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