Halliburton (HAL) Down 9.1% 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 9.1% in that time frame, outperforming 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 Q1 Earnings Meet Estimates

Halliburton Company reported first-quarter 2022 adjusted net income per share of 35 cents, in line with the Zacks Consensus Estimate. The company had reported a profit of 19 cents in the year-ago quarter. The performance reflects stronger-than-expected profit from its Drilling and Evaluation division.

Meanwhile, revenues of $4.3 billion were 24.1% higher than the year-ago quarter and came ahead of the Zacks Consensus Estimate by 2.4%. North American revenues rose 37.1% year over year to $1.9 billion, while revenues from Halliburton’s international operations were up 15.2% from the year-ago period to $2.4 billion.

Further, as part of its ongoing commitment to debt reduction, the company announced that it redeemed $600 million of its $1 billion of senior notes due in 2025.

Inside Halliburton’s Segments

Operating income from the Completion and Production segment was $296 million, 17.5% above the year-ago level of $252 million. The division’s performance was buoyed by improving completion tool sales in the Western Hemisphere and the Middle East, strength in the pressure pumping and artificial lift businesses across the Western Hemisphere, higher cementing activity in Africa and Middle East/Asia, to go with demand uptick for Halliburton’s well intervention services in onshore North America and the Eastern Hemisphere.

However, the segment profit missed the Zacks Consensus Estimate of $349 million due to activity slowdown across an array of product service lines in Europe, and decrease in completion tool sales in Asia.

Drilling and Evaluation unit profit surged from $171 million in the first quarter of 2021 to $294 million in the corresponding period of 2022. The division also managed to beat the Zacks Consensus Estimate of $250 million. This was primarily due to overall increased drilling-associated activities, higher wireline operations in North America land, Latin America, and the Middle East, a pick-up in overseas testing services, as well as increased project management activity in Latin America, India, and Oman.

Balance Sheet

Halliburton reported first-quarter capital expenditure of $189 million. As of Mar 31, 2022, the company had approximately $2.2 billion in cash/cash equivalents and $8.5 billion in long-term debt, representing a debt-to-capitalization ratio of 54.8%.

Management’s Outlook

Halliburton — the world’s biggest provider of hydraulic fracking — noted that the energy landscape across North America is exhibiting considerable tightness. The company’s Completion and Production unit should see margins expanding, with high commodity prices and robust customer demand pitted against the backdrop of an equipment market that is almost entirely sold out.   

Looking ahead, the company expects its international business to prosper through the rest of 2022. According to HAL, the revenue growth witnessed during the first quarter across all regions is proof that the multi-year upcycle has already started. Halliburton believes that its smart strategy, digital leadership, capital efficiency, and the global presence points to a rosy outlook. The Houston-based company’s cash flow generation capabilities and balance sheet strength should also ensure increased shareholder returns.
 

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

At this time, Halliburton has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. 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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