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Halliburton (HAL) Down 4.6% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Halliburton (HAL). Shares have lost about 4.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Halliburton due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Halliburton Q4 Earnings Beat Estimates

Halliburton reported fourth-quarter 2023 adjusted net income per share of 86 cents, surpassing the Zacks Consensus Estimate of 80 cents and well above the year-ago quarter profit of 72 cents (adjusted). The outperformance reflects strength in the international markets, partly offset by weak performance in the North American region.

Meanwhile, revenues of $5.7 billion were 2.8% higher than the corresponding period of 2022 but came below the Zacks Consensus Estimate (by some $47 million).

In good news for investors, Halliburton raised its quarterly dividend by 6.3% to 17 cents per share (or 68 cents per share annualized).

Inside Halliburton’s Regions & Segments

North American revenues fell 7.2% year over year to $2.4 billion, which also failed to meet our projection of $2.7 billion. Revenues from Halliburton’s international operations were up 11.6% from the year-ago period to $3.3 billion and surpassed our estimate of $3.1 billion.

Operating income from the Completion and Production segment was $716 million, up handsomely from the year-ago level of $659 million but below our projection of $701.7 million. The division’s performance was buoyed by improving completion tool sales in the Gulf of Mexico, Africa, and the Middle East. These factors were offset by lower stimulation activity in U.S. onshore and Mexico, tepid artificial lift activity in U.S. land, to go with weak completion tool sales in Latin America.

Drilling and Evaluation unit profit improved from $387 million in the fourth quarter of 2022 to $420 million in the corresponding period of 2023. However, the division marginally missed our estimate of $421.7 million. This performance could be attributed to higher software sales in in the Middle East/Asia, Africa, and Latin America, plus a pickup in fluid services in the Western Hemisphere and Africa. Partly offsetting these positives was the disruption in Norway activity on account of adverse weather.

Balance Sheet

Halliburton reported fourth-quarter capital expenditure of $399 million, higher than our projection of $358.5 million. As of Dec 31, 2023, the company had approximately $2.3 billion in cash/cash equivalents and $7.6 billion in long-term debt, representing a debt-to-capitalization ratio of 44.7. HAL also bought back $254 million worth its stock during the October-December period. The company generated $1.4 billion of cash flow from operations in the fourth quarter, leading to free cash flow of $1.1 billion.

Management Remarks & Outlook

Halliburton — the world’s biggest provider of hydraulic fracking — noted that 2023 turned out to be a great year, with both its segments recording their highest operating margins in over a decade. Looking ahead, the company sees strong demand for oilfield services this year. HAL, which generated an impressive $2.3 billion of free cash flow in 2023, sees the momentum continuing in 2024 as well. Regarding debt retirement, this yea, Halliburton repaid some $300 million to further improve its balance sheet strength.


 

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How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Halliburton has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Halliburton has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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