NEW YORK (TheStreet) -- Schlumberger (SLB) - Get Schlumberger NV Report stock is falling 1.74% to $71.25 in pre-market trading on Wednesday after the company agreed to acquire Cameron International (CAM) in a $14.8 billion deal.
Cameron stock is soaring 46.29% to $62.10 in pre-market trading.
Cameron shareholders will receive 0.716 Schlumberger shares and $14.44 in cash per each share.
"We believe that the next industry technical breakthrough will be achieved through integration of Schlumberger's reservoir and well technologies with Cameron's leadership in surface, drilling, processing and flow control technologies," Schlumberger CEO Paal Kibsgaard said in a statement.
"We will achieve significant efficiency gains through lowering operating costs, streamlining supply chains, and improving manufacturing processes," Kibsgaard added.
The companies expect $300 million in synergies in the first year, and $600 million in the second year.
The transaction will have to be approved by Cameron shareholders and regulators, but is expected to close in the first quarter of 2016.
Separately, TheStreet Ratings team rates SCHLUMBERGER LTD as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate SCHLUMBERGER LTD (SLB) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.22, which illustrates the ability to avoid short-term cash problems.
- SLB, with its decline in revenue, slightly underperformed the industry average of 22.5%. Since the same quarter one year prior, revenues fell by 25.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for SCHLUMBERGER LTD is currently lower than what is desirable, coming in at 31.54%. Regardless of SLB's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SLB's net profit margin of 12.47% compares favorably to the industry average.
- The change in net income from the same quarter one year ago has exceeded that of the Energy Equipment & Services industry average, but is less than that of the S&P 500. The net income has significantly decreased by 29.5% when compared to the same quarter one year ago, falling from $1,595.00 million to $1,124.00 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.69%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 35.76% compared to the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
- You can view the full analysis from the report here: SLB Ratings Report