SLB - Embedded Expectations Analysis - 2019 11 12
Schlumberger Limited (SLB:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) Earnings, with a 21.3x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management appears concerned about their OneStim business, North American margins, and international operations.Specifically, management may be concerned about the sustainability of recent performance improvements, ongoing headwinds to growth on land, and OneStim activity. Furthermore, they appear concerned about the sustainability of recent international revenue growth and margin expansion, and they may lack confidence in their ability to meet their full year international revenue growth target. Additionally, they appear concerned about the impact of their ongoing divestitures and about the impact of their decision to pursue margin over scale for OneStim. Finally, management appears concerned about their ability to meet their book-to-bill ratio target for OneSubsea, and they may lack confidence in their ability to meet their North American margin improvement target.
Schlumberger provides technology for reservoir characterization, drilling, production and processing to the oil and gas industry. The company has four segments: Reservoir Characterization, which consists of the principal technologies involved in finding and defining hydrocarbon resources; Drilling, which consists of the principal technologies involved in the drilling and positioning of oil and gas wells; Production, which consists of the principal technologies involved in the lifetime production of oil and gas reservoirs; and Cameron, which consists of the principal technologies involved in pressure and flow control for drilling and intervention rigs, oil and gas wells and production facilities.
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- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
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- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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