Company Profile: Houston-based Schlumberger and its subsidiaries supply technology, integrated project management and information solutions to customers in the oil and gas industry worldwide.On Jan. 20, Schlumberger announced that its board approved a 19% increase to its quarterly cash dividend, promising shareholders 25 cents per share. The next payout will come on April 1 to shareholders of record on Feb. 16, bringing Schlumberger's yield to around 1.2%. The dividend news came as Schlumberger's fourth-quarter earnings results set a positive tone for the oil service stock sector. Schlumberger posted quarterly revenue above $9 billion, ahead of the Street consensus for $8.8 billion. Earnings per share of 85 cents topped expectations by 8 cents. Arguably more important than the numbers was the outlook from Schlumberger, and the commentary on activity outside North America. It wasn't very specific, but it was roundly positive. Schlumberger noted that outside North America, activity improvements in the North Sea, West Africa, and several Middle East & Asia GeoMarkets, coupled with strong year-end product sales particularly for software, "more than offset" continued weakness in Mexico and seasonal activity decline in Russia. Schlumberger added that the consensus forecast for demand in 2011 shows a further healthy increase. "Oil prices have moved into a range that will encourage increased investment, particularly in exploration.... While we do not anticipate a return to pre-Macondo activity levels in deepwater U.S. Gulf of Mexico in 2011, we do expect a marked increase in deepwater activity in the rest of the world. These factors, coupled with increases in development activity and production enhancement in many other areas, promise stronger growth rates as the year unfolds." Schlumberger shares, along with energy stock peers Halliburton (HAL), Baker Hughes (BHI) and Weatherford International (WFT), spiked on Jan. 26, reaching toward fresh 52-week highs as the Dow broke the market's psychological barrier of 12,000. Citigroup (C) lifted its price target on Schlumberger to $110, setting a buy rating on the stock. The analysts raised their earnings-per-share expectations for Schlumberger, citing the firm's improving North American results in the recent quarter. Analysts from FBR Capital Market (FBCM) also boosted their price target on Schlumberger to $110, from $97, and set an outperform rating on the stock. Energy sector analysts have expected the oil service stocks to trade up and down on any given day, said Dahlman Rose analyst Darren Gacicia, referring to the current period as a transition phase for the group. Short-term traders are generally active in trading around earnings, but with overall bullish commentary from the oil service companies and the Dow hitting 12,000, it's likely that long-term investors were consolidating in these stocks, pushing prices higher post-earnings.
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