Schlumberger Ltd. (SLB)posted a 13% jump in second-quarter earnings, driven by strong growth throughout the Eastern Hemisphere, which more than offset the seasonal slowdown in Canada. Revenue was up 20% year-over-year to $6.75 billion, powered by improved drilling in the North Sea, better project performance in Mexico and Russia and higher demand for technologies.
The company maintained its bullish near-term outlook with an improving onshore North American scenario complementing continued international strength. However, our Hold recommendation on Schlumberger shares remains unchanged as we continue to believe that Halliburton (HAL) and Baker Hughes (BHI)offer better value in this space.
We think that international pricing will follow the North American lead, which should help sustain Schlumberger's margin-improvement trend. And with approximately 35 new-build offshore rigs expected to enter the market later this year, with more expected next year, the outlook continues to remain robust. With about three-fourths of its revenue coming from markets outside North America, Schlumberger is better positioned than its large-cap peers in major international markets. A number of significant acquisitions in the recent past have accelerated the company's growth momentum.
Another significant growth driver for Schlumberger is Integrated Project Management (IPM), as demand for it has grown notably in the last few years. The IPM capability enables Schlumberger to integrate and apply its own services, technologies, and geo-scientific knowledge.
On a 2009 P/E basis, SLB shares currently trade at 1.3x the S&P 500, towards the top of the historical trading range and we feel that current valuation adequately reflects these positives.
Read the full analyst report on SLB
Read the full analyst report on HAL
Read the full analyst report on BHI
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