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Schlumberger Is So Confident It's Projecting Earnings 3 Years Out

Stocks in this article: SLB HAL BHI WFT

NEW YORK (TheStreet) -- Rising oil prices have taken a meaningful chunk out of household budgets. With many U.S. cities already seeing gas prices spike north of $4 per gallon, things may only get worse, especially with geopolitical issues bringing uncertainty to the oil market.

Despite all of these concerns, Schlumberger (SLB) investors aren't worried. This speaks to the level of confidence the company's management has shown with the future of the business.

The stock closed Tuesday at $114.46, up 27% on the year to date, doubling the energy sector's 14% gain. In the trailing 12 months, Schlumberger has rewarded investors with 51% gains, also outperforming the sector's 28% gain during that span.

>>Here Are Three Factors That Could Drag Down Oil Prices Even More

>>All Hail Whiting Petroleum, the New King of the Bakken

With so much money on the table, investors are anxious for a quick resolution to the violence in Iraq. These concerns are valid.

Schlumberger management isn't worried, however. In fact, since the conflict began the stock has been up by almost 15%. The reason? Management has communicated a clear and comprehensive multi-year growth plan towards 2017.

The main drivers of growth will come from the company's drilling and production technology. Management has spoken favorably about integration capabilities and what it calls "best-in-class operations and technology." The company intends to drive a wedge between itself and its peers like Halliburton (HAL), Baker Hughes (BHI).

The entire industry has been under significant pricing pressure due to, among other things, weak oil prices, cost inflation and slumping production levels. Schlumberger wants to use its growing free cash flow to make the sort of efficiency improvements needed to outgrow the market and widen the gap lead.

To that end, by 2017 Schlumberger is targeting earnings between $9 and $10 per share, which would result in a compound annual growth rate of roughly 17% to 20%. Analysts haven't yet modeled for that far ahead. Current estimates for full-year 2014 is for $5.70 a share and the company earned $4.75 in 2013.

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