Jefferies Upgrades Schlumberger (SLB) to Buy; Raises Estimates on Margin Story
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Jefferies upgraded Schlumberger (NYSE: SLB) from Hold to Buy with a price target of $96.00 as they give more credit to SLB's margins.
Analyst Brad Handler commented, "We believe SLB's margin experience is supportive of company guidance of 65% incremental margins with recovery and we raise our 2018E EPS to $4.15 from $3.80 (16% above Consensus). Further, although our revenue growth by region is only modestly higher than peers, largely due to the aforementioned deepwater view, we think it is reasonable to imagine that SPM initiatives and the 19 acquired companies since 2013 have raised that revenue growth potential."
He added, "SLB is trading at 14x our 2017E EBITDA and 9x 2018E versus the prior cycle fwd-12-month average of 9.4x. However, with our outlook for a near tripling of EBITDA from 2017 to 2020 and for >$9 EPS and >$7/share of FCF in 2020, we see room for 2018 multiples to push higher."
Shares of Schlumberger closed at $78.71 yesterday.
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