Thursday, January 24, 2013

Schlumberger (SLB) 2013 Review

Schlumberger is the world’s leading oilfield service company providing wireline, drilling and measurement and well testing services, completion, artificial lift, data and consulting services, land and marine seismic services and reservoir services.  The company has grown profits at an 18% pace over the past ten years; the dividend growth rate has been lower rate but management has stated that it intends to increase it in the near term.  In addition, the company has earned an 11-25%+ return of equity over the last ten years.  The company should continue to grow at an above average over the long term as a result of:

(1) its financial strength and technological leadership positions it to benefit from increased activity in oilfield services and simulation and completion services,

(2) exploration and production activities are increasing internationally as well as in the Gulf of Mexico,

(3) its Production Management unit is seeing sustained improvement.

 Negatives:

(1) intense competition causing pricing and margin pressures,

(2) commodity price and currency fluctuations,

(3) geopolitical risks,

(4) adverse weather conditions can negatively impact demand.

Schlumberger is rated A++ by Value Line, carries a debt to equity ratio of about 21%, and its stock yields of approximately 1.6%.

      Statistical Summary

                 Stock      Dividend         Payout      # Increases  
                 Yield     Growth Rate     Ratio        Since 2003

SLB           1.6%          10%             22%              7
Ind Ave      2.4             10                29                NA 

                 Debt/                      EPS Down       Net        Value Line
               Equity         ROE      Since 2003     Margin       Rating

SLB          21%            18              1                14%           A++
Ind Ave     26               14             NA              15             NA

     Chart

            Note: SLB stock made good initial progress off its March 2009 low, quickly surpassing the downtrend off its July 2007 high (straight red line) and the November 2008 trading high (green line).  Long term the stock is in an uptrend (blue lines).  Intermediate term, it is in a trading range (purple lines).  The wiggly red line is the 50 day moving average.  The Dividend Growth Portfolio owns a full position in SLB, while the Aggressive Growth Portfolio owns a 75% position.  The upper boundary of its Buy Value Range is $38; the lower boundary of its Sell Half Range is $109.




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