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Analyst Blog

Shares of Halliburton Co. (HAL - Analyst Report) hit a 52-week high of $56.15 on Nov 11. In fact, the Houston, TX-based oilfield services behemoth has seen its stock price climb some 25% during the past six months. This price appreciation can be attributed to its superior business model, attractive fundamentals and the ability to grow cash flow.

Why the Bullishness?

Halliburton is among the top three players in each of its product/service categories, and is present in all major hydrocarbon-producing regions of the world. The company, which has surpassed earnings estimates in each of the last 4 quarters, enjoys very strong relationships with both publicly-traded and national oil companies worldwide. In particular, the sluggishness in

Halliburton’s international operations continues to reflect strong demand for its services on the back of higher activity. This is expected to be a key growth driver going forward with pricing in the region remaining competitive. We have identified Latin America – offering enough shale development opportunities – as the important market in this regard. Additionally, despite certain issues in Halliburton’s core U.S. segment, the long-term prospects for the business remain robust.

In September, Halliburton got reprieve from the United States Department of Justice (DOJ), when it closed its investigation into the company’s role in the Gulf of Mexico’s Macondo well disaster. We believe that the judge’s acceptance of Halliburton’s guilty plea removes an overhang from the oilfield service provider’s future.

Finally, Halliburton’s positive ‘Analyst Day’ update, together with the recent increase in its quarterly dividend are other pieces of positive news. While the Analyst Day conveyed the world's second-largest oilfield services firm after Schlumberger Ltd.’s (SLB - Analyst Report) intentions to outgrow the deepwater market by 25% over the next 3 years, the payout hike highlights Halliburton’s commitment to create value for shareholders.

Zacks Rank & Stock Picks

With Halliburton shares trading at a 52-week high, any upside from here may be limited, as suggested by the company's Zacks Rank #3 (Hold). Meanwhile, one can look at Matador Resources Co. (MTDR - Snapshot Report) and SM Energy Co. (SM - Analyst Report) as good buying opportunities. These U.S. upstream energy operators – sporting a Zacks Rank #1 (Strong Buy) – have solid secular growth stories with the potential to rise significantly from the current levels.
 

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