With each segment performing so well, it came as no surprise that operating income grew 9% year over year and 13% from the April the quarter. Even more impressive was the fact that despite the perpetual weakness in North America and the sluggishness in Latin America, management was able to grow margins both on a year-over-year basis and sequentially. Given the fragile nature of this sector, I can't take for granted how hard of an accomplishment this is, especially when Baker Hughes missed its margin estimates.
I'm not suggesting this was a blowout quarter for Schlumberger. But I do believe the company has shown plenty of signs that the worst is over and better results are on the way. If nothing else, it's reassuring that management continues to show that it can do more with less while also laying out steps to grow earnings-per-share faster than revenue. Along those lines, one of the stated goals is the company wants to establish the highest margins in North America.
It's a great goal to have. What this tells me is that it's also possible that some of the weakness Schlumberger continues to experience in North America has been of its own doing. What I mean by this is, it's not uncommon for companies to turn away business that does not meet certain margin criteria. Again, this suggests that even when the numbers may not reflect it, management is still in control.
To that end, moving forward, investors should expect better results from North America, both on a year-over-year and sequential basis. Likewise, I don't envision any drawbacks in growth regions such as Mideast/Asia, Africa and Russia.All of this points to a very attractive stock, which I believe is heading to $90 per share. To reach $90, the company only needs to trade at 10 times forward earnings before interest, tax, depreciation and amortization. With the stock now trading at just eight times 2014 EBITDA projections, the next couple of quarters should yield better results, which should raise these estimates higher. In the meantime, the stock seems cheap when considering that the company has not only a strong share buyback program, but also a solid dividend policy. At the time of publication, the author held no position in any of the stocks mentioned. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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