This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Schlumberger Slips in North America, but Stock Priced Well

NEW YORK ( TheStreet) -- I was recently asked how a stock like Schlumberger (SLB - Get Report) that trades at twice the price-to-earnings ratio of a dominant company like Exxon Mobil (XOM) can be considered cheap, especially because Schlumberger's P/E of 18 is already a point higher than the industry average?

The energy sector has been extremely volatile, but Schlumberger has always carried this sort of premium, even over formidable rivals such as Halliburton (HAL - Get Report) and Baker Hughes (BHI - Get Report). But Schlumberger has shown no immunity to sluggish oil prices and weak rig counts -- the same issues that has impacted the industry.

Nevertheless, given Schlumberger's market-leading position, investors were always willing to pay more. Given how well Halliburton is now performing in international markets, has Schlumberger's weakness in North America narrowed the gap between the two rivals? And does Schlumberger still deserve its premium?

Despite Weakness, First Quarter Was No Calamity

Oilfield service revenue arrived at $10.67 billion, up 8% year over year, but down 5% sequentially. Schlumberger was hurt by slower-than-expected demand along with increased competition, which resulted in the revenue miss -- albeit marginally. Still, Schlumberger's performance in North America stood out like a sore thumb.

Even though demand was a bit soft across all geographies (relative to expectations), North America's 3% decline in revenue hurt considerably. As with Halliburton and Baker Hughes, slumping oil prices have been an issue for some time. Although a case can be made that the 3% decline is much better than Halliburton's 11% drop in North America, Halliburton has significantly more exposure than Schlumberger.

Schlumberger did well in areas like Mideast/Asia, which posted 22% surge in revenue. There was a 9% increase in Latin America and Europe/Russia/Africa.

Although drilling revenue rose 9% year over year, the drilling business was actually flat from the fourth quarter. Similarly, production revenue arrived up 7% year over year, down 4% sequentially. The same pattern was seen in the reservoir business, up 8%, but down 11% from the fourth quarter.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BHI $48.36 0.00%
HAL $41.31 0.00%
SLB $80.34 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs