Wells Fargo Raises SLB Estimates, Valuation Range

Following Schlumberger's (NYSE: SLB) strong Q4 2010 results of $0.85 per share “versus our estimate of $0.80 per share and consensus of $0.78 per share, our 2011 modeling now incorporates higher North American revenues and slightly higher margins than previously, offset by some more conservative estimates for Asian margins and lower expectations for WesternGeco's seismic business,” Wells Fargo reports.

“Overall, we've increased our 2011 EBIT forecast by $140MM, or 2%, but much of this increase has been offset by increased interest expense
(SLB has increased its debt by about $2B over the past 2 months) and a 250bp increase to our assumed tax rate.

“Our 2012 forecasts have been increased more substantially as we expect international activity and margins to accelerate in 2H11 and into 2012. In all, we have increased our revenue and EPS estimates to $39.3B/$3.83 from $37.4B/$3.82 for 2011 and to $43.3B/$4.84 from $41.4B/ $4.64 for 2012. We are raising our range to $92-94 from $88-92 based on a 10.6x-10.8x multiple of 2012 EBITDA.”

Schlumberger currently trades at $82.66.