Schlumberger Earnings Preview: Revenue Growth Expected to Slow

Schlumberger NV (NYSE: SLB), a global oilfield services company that has seen year-over-year revenue growth in the double digits for the past four quarters, is scheduled to report second-quarter 2012 results Friday, July 20, before the U.S. markets open.

Expectations

The Street is expecting that Schlumberger will report per-share earnings of $1.00 for the quarter and revenues of about $10.4 billion. In the same period of last year, the company reported $0.87 per share and $9.6 billion in revenue. Note that the earnings per share (EPS) estimate has slipped a couple of pennies in the past 60 days. Schlumberger has had a mixed record on meeting EPS estimates, falling short in two of the past five quarters. The company only beat in the first quarter by a penny per share.

The company attributed first-quarter results to strong demand for its services in the Gulf of Mexico and oil shale basins throughout North America. It said it was positive on international markets and expected the rig count to increase by more than 10 percent in 2012, as well as robust exploration and deepwater activity. Threats to profitability included commodity price fluctuations, geopolitical risks, competition, changes in economic conditions and foreign currency fluctuation. Shares jumped about 6 percent following the first-quarter report.

Looking ahead to the current quarter, year-over-year EPS growth is expected, but the revenue growth is expected to be only 8.2 percent. So far, analysts expect full-year per-share earnings growth of more than 10 percent, and revenue to be about 9 percent higher than in the previous year.

The Company

Schlumberger operates in the follow segments: the Reservoir Characterization Group, Reservoir Production Group, the Drilling Group and Distribution. The company was founded in 1926 and is headquartered in Houston. It is an S&P 500 component with a market capitalization of more than $90 billion. That is greater than the market caps of competitors Halliburton (NYSE: HAL) and Baker Hughes (NYSE: BHI).

Baker Hughes also reports second-quarter results Friday morning, and Halliburton reports on Monday. Both are expected to report year-over-year declines in earnings.

During the three months that ended in June, Schlumberger sold its Wilson distribution business to National Oilwell Varco (NYSE: NOV), and it acquired GEDCO, a provider of integrated geophysical survey design software and services. Schlumberger and Liquid Robotics formed a joint venture to develop services for the oil and gas industry using Wave Gliders, the world's first wave-powered, autonomous marine vehicles.

Performance

Schlumberger's long-term EPS growth forecast is about 23 percent. The return on equity is about 16 percent, which is higher than that of Baker Hughes. Short interest in Schlumberger is less than 1 percent of the float, which is less than for Baker Hughes and Halliburton. Of analysts surveyed by Thomson/First Call, 29 out of 32 recommend buying shares. Their mean price target is about 20 percent higher than the current share price, meaning they feel there is plenty of growth to come.

The share price is about the same as it was at the beginning of the year, despite rising almost 5 percent in the past week. It moved above the 50-day moving average last week for the first time since early May. Over the past six months, the stock has outperformed Halliburton and Baker Hughes, but underperformed the broader markets.