On Monday, Susquehanna has revised its price target for SLB (NYSE: SLB), a leading oilfield services company, reducing it to $56 from the previous $60 while sustaining a Positive rating on the stock. The adjustment follows the company's third-quarter results for 2024, which were reported recently.
The firm's analyst has updated the SLB model, now projecting the company's EBITDA for 2024 and 2025 to be $9 billion and $9.4 billion, respectively. This is a decrease from the previous estimates of $9.2 billion and $10 billion. The revised forecast takes into account the sale of SLB's APS business, persistent weakness in US land activity, and moderated international growth due to a slowdown in demand from shorter-cycle international projects.
Despite these challenges, the analyst believes that strong demand for longer-cycle projects will still lead to some growth for SLB in 2024. The company is also expected to benefit from an improving margin profile and free cash flow (FCF) growth in 2025.
SLB reported its third-quarter adjusted earnings per share (EPS) at $0.89 and EBITDA at $2.34 billion, aligning with Susquehanna's estimates of $0.89 for EPS and $2.35 billion for EBITDA. Notably, the company's FCF for the third quarter was approximately $1.8 billion, which is significantly higher than the estimated $1.4 billion, representing a robust 77% conversion rate.
In other recent news, Schlumberger Limited (NYSE:SLB) has been the focus of various analyst revisions. Stifel trimmed its price target for SLB to $60, maintaining a Buy rating, following the company's third-quarter results and fourth-quarter guidance. Citi also reduced its price target on SLB to $54, maintaining a Buy rating, while adjusting SLB's fourth-quarter EBITDA projection to $2.36 billion.
Raymond James, Goldman Sachs (NYSE:GS), and Barclays (LON:BARC) also reviewed SLB's performance, with Raymond James reducing its price target to $57 but keeping an Outperform rating, Goldman Sachs holding steady with a Conviction Buy rating and a $52 price target, and Barclays adjusting its SLB target to $61, down from $63, but maintaining an Overweight rating.
Recent developments include SLB's third-quarter earnings report, which showed 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.
SLB's financial outcomes and forecasts suggest sustained growth and strong free cash flow in the coming years. The anticipated sale of the Palliser property in Canada is expected to help SLB exceed its return targets, with projections now set to surpass the $3.0 billion mark in 2024 and its $4.0 billion target in 2025.
InvestingPro Insights
To complement Susquehanna's analysis, InvestingPro data reveals that SLB's market capitalization stands at $59.19 billion, with a P/E ratio of 13.48. This relatively modest valuation aligns with the analyst's positive outlook on the company's future performance.
InvestingPro Tips highlight SLB's financial strength and shareholder-friendly policies. The company has maintained dividend payments for an impressive 54 consecutive years, demonstrating a commitment to returning value to shareholders even in challenging market conditions. This consistency is particularly noteworthy given the cyclical nature of the oil services industry.
Additionally, SLB operates with a moderate level of debt and has liquid assets exceeding short-term obligations, which supports the company's ability to navigate the current market uncertainties mentioned in the Susquehanna report. These factors contribute to SLB's perfect Piotroski Score of 9, indicating strong financial health.
For investors seeking more comprehensive analysis, InvestingPro offers 10 additional tips for SLB, providing a deeper understanding of the company's financial position and market performance.
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