In the 1989 motion picture "Dead Poets Society," actor Robin Williams, playing school teacher John Keating, inspires his new students to take advantage of opportunities presented in life, to "seize the day." Well, if Robin Williams will allow, now is the time to "seize the day with Schlumberger." (Pronounced: shlum-bur-ZJAY.)
Oilfield services company Schlumberger Ltd. (NYSE: SLB) is likely to benefit from growing demand for oilfield services technology, particularly in the high technology-dependent Middle East, Africa, and Eastern Europe regions.
Further, although North American margins have narrowed somewhat so far in 2007, international margins widened. Overall, in 2008 analysts see SLB's margins totaling 30% -- still a very healthy figure -- with revenue growth of 12-14%.
Additional positives: Look for Schlumberger to continue to register solid revenue gains in the eastern hemisphere, as the company concentrates on higher-growth regions. Equally good news: SLB has pulled back about $20 from 2007 highs to about $93 -- view that pullback as a buying opportunity. SLB's p/e of 24 is not low, but it's still reasonable if emerging market oil demand trends continue. Don't look for emerging market oil demand trends to change any time soon.
The qualifiers? Analysts are keeping an eye on a possible decline in oil/gas exploration budgets by oil companies, and overall production activity, as reductions here would affect SLB's results. The Reuters F2007/F2008 EPS consensus estimates for SLB are $4.21/$5.07.
The First Call mean rating for SLB is Buy (24 firms), and the mean 2007 target is $116 (high: $137, low: $96).
Stock Analysis: Schlumberger is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than one year should be rewarded from SLB's shares. Consider a stop loss of $67.
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