SLB's (SLB) softer Q2 guidance is due to incremental impact from Middle East disruptions, but markets continue to focus on the scope of higher service demand exiting the conflict, RBC Capital Markets said in a Friday research report.

The brokerage anticipates 2026 free cash flow of $3.9 billion, given that SLB expects to spend $2.5 billion of capital this year, which could prompt the company to return all of its FCF to shareholders in 2026.

For Q2, RBC guided for EPS of $0.53 on revenue of $8.7 billion, according to the note.

The brokerage reiterated its outperform rating on the stock and price target of $61 per share.

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