Can Schlumberger Outperform The Market? Yes.

• Schlumberger Limited SLB has seen an almost 13 percent decline in its share price, year to date.
• Citi’s Scott Gruber has upgraded the rating on Schlumberger from Neutral to Buy, while lowering the price target from $93 to $87.
• Gruber believes that the company has the potential to outperform the OFS sector as well as the broader market with 15 percent annual upside over the next three years.

Having underperformed the S&P 500 year to date, Gruber believes that Schlumberger now has an attractive valuation and that the company’s “superior strategy, delivery platform, technology development and execution will facilitate a resumption to excess returns in 2017.”
According to the Citi report, the company scores high on all of Citi’s OFS Five Forces, which include “1) leverage to growth, 2) execution & product quality, 3) technology development, integration and strategy, 4) margin performance, and 5) efficiency of cash usage.”

However, Gruber believes that the consensus forecasts for Schlumberger could prove to be high, given that they do not take into account the recent drop in oil prices and the impact of the summer vacations.

The earnings estimates for the company have been lowered to reflect the decreased activity forecasts for North America and the international markets.