Earnings Preview: Schlumberger (SLB, BHI, HAL) (July 2007)

By Douglas A. McIntyre Published Jul 17, 9:40AM EDT

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Schlumberger Ltd (NYSE:SLB) is the largest oil field services company in the world and it gives every appearance of keeping its leadership in the field. The stock price has jumped more than 18% since the end of the first quarter of 2007, and the consensus estimate ahead of earnings Friday for the second quarter is $0.95, up 23% from a year ago, but a penny less than the first quarter’s earnings. The stock closed at $90.54 on Monday and First Call/Thomson puts a mean analyst target price for the stock at $94.21, so there is still room for the company to grow.

SLB competitor Baker Hughes Inc. (NYSE:BHI) got hammered last week when it released guidance lowering its earnings estimate from $1.17 to $1.07 to $1.09. BHI’s problems come from its operations in Canada’s oil sands, where it expects less activity and lower profits. That should be no surprise. Development in the oil sands has hit a couple of speed bumps: environmental concerns, especially over the vast amounts of water needed to process the gooey muck; and higher labor and materials cost.

SLB doesn’t have the same exposure in North America. It’s main operations are elsewhere, including a recent operating contract with Venezuela’s PdVSA to manage rigs and provide engineeering services to the fields PdVSA recently "acquired" from Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), and ConocoPhillips (NYSE:COP). SLB’s WesternGeco division is also acquiring more small software companies that will further enhance its leadership position in exploration for new resources.

SLB is solid, really solid, and its strategy and execution have been near perfect. It could even be argued that Schlumberger’s winning deal after deal isthe ‘tipping-point’ reason that Halliburton (NYSE:HAL) is changing itscorporate headquarters flag. We’ll find out Friday if the company can maintain its flawless execution.

Paul Ausick
July 17, 2007

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.