Shares of Schlumberger Ltd. climbed on Monday as an analyst upgraded the stock, citing strong operating results, its attractive international exposure compared with peers and optimism about the oilfield services' earnings outlook.
Schlumberger shares climbed $1.64, or 2.6 percent, to $64.96 in afternoon trading.
Credit Suisse analyst Brad Handler upgraded his rating for Schlumberger to "Outperform" from "Neutral," and raised his price target for the stock to $76 from $72.
Compared with its peers, Schlumberger, the world's largest oilfield services company, is a "clean" alternative with its higher margins and stronger position to gain from international markets, said Handler. He pointed to a number of troubles weighing on the competition. Baker Hughes Inc. saw its third-quarter market share slip, cash flow concerns riddle Smith International Inc. and Weatherford International Ltd. faces several challenges including near term results and cash flow worries.
Schlumberger, on the other hand, faces upside to its current estimate given the growing optimism in international and exploration spending. As oil companies set their budgets, Handler suspects they will allot additional funds for multi-client data. Handler expects positive surprises in oilfield margins as well, as aggressive cost saving efforts outweigh some price concessions in renegotiated contracts.
Handler noted that even though Schlumberger's current stock price is not cheap, its premium "is also supported by its stronger balance sheet and cash generation" compared with its peers.