One of the more obvious examples of the valuation disconnect today is Schlumberger vs. Halliburton, and as a result, we have removed Halliburton from the firm’s Best Ideas list, and replaced it with Schlumberger.
For starters, on a forward EV/EBITDA basis, Schlumberger now trades at a 30% discount to its 10-year average relative multiple vs. Halliburton—a discount that represents nearly a 2-standard deviation from the mean.
Additionally, while Schlumberger may not have the concentration of U.S. revenue of Halliburton, we believe that investors continue to under-estimate the incremental earnings contribution that Schlumberger should generate from its data and analytics software, transformation initiatives, integration of Cameron, and share repurchases.