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What's in the Cards for Halliburton (HAL) in Q2 Earnings?
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Major oilfield service provider Halliburton Company (HAL - Free Report) is set to release second-quarter 2017 results before the opening bell on Jul 24.
In the preceding three-month period, the Houston, TX-based company reported better-than-expected operating earnings on improved utilization from growing North American rig count.
The world's second-largest oilfield services company after Schlumberger Ltd. (SLB - Free Report) has an incredible history when it comes to beating earnings estimates. The company posted a positive earnings surprise in each of the last four quarters, the average being 68.49%. Investors should note that Halliburton hasn’t missed earnings estimates since mid-2014.
Let’s see how things are shaping up for this announcement.
Drilling activities have increased of late due to an improvement in North American land market. This is likely to help Halliburton witness higher revenues in the domestic markets. During the second quarter, the count of U.S. rigs have increased around 15% to 940. Over the last one year the U.S. rig count has increased around 116%. This increased rig count bodes well for the oilfield service player Halliburton. During the quarter, the international rig counts also rose by about 2%. Halliburton, which generated 48% of its total revenue from international operations in the last quarter, is likely to benefit from the higher international rig count. President Trump’s exit from Paris Climate accord also provided an impetus to drilling activities.
Moreover, the company’s new CEO, Jeff Miller, is contemplating about raising the company’s various services rates, which are likely to boost the revenues of the company. Halliburton expects the prices to increase by at least 10% and in some cases 20% or more this year.
During the quarter, the company acquired the Tulsa-based Summit ESP. We expect Halliburton to gain from this acquisition given that devices manufactured by Summit ESP are in high demand and are being utilized by upstream energy players for extending the life of shale wells. The development is likely to help the company to earn significant cash flow for stockholders. However, the cost of acquisition may weigh on the financials of the company in the quarter. As it is, the company has weak financials with high debt and low cash reserves.
We appreciate Halliburton’s successful cost-management initiatives in the midst of weak oil prices. However, with the rise in North America’s shale oil patch activities, the company is actively engaged in increasing its headcount. Halliburton has increased its active fleet by 30%, which required the company to increase employment by more than one-third of its workforce to 2,700 workers in the Permian Basin. The increased costs on this account might adversely effect earnings.
Further, weaknesses in oil and gas prices could mar demand for oilfield services. During the second quarter, oil and natural gas prices fell 8.4% and 5%, respectively. Lower commodity prices might lead to reduced exploration and production activities. This could lead to lower investments by oil majors which will impact revenues of the oilfield services companies. This is also reflected in the share price of Halliburton which witnessed a decline of around 14% in the second quarter.
Our proven model does not conclusively show that Halliburton is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +15.79%. This is because the Most Accurate estimate is 22 cents, while the Zacks Consensus Estimate is pegged at 19 cents.
Zacks Rank: Halliburton, under the Zacks categorized Oil and Gas - Field Services industry, currently carries a Zacks Rank #4 (Sell).
Please note that we caution investors against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Stocks Poised to Beat Earnings Estimates
While an earnings beat looks uncertain for Halliburton, here are some energy firms in the same industry you can consider on the basis of our model, which shows that they have the right combination of elements to beat estimates this quarter:
C&J Energy Services, Inc. has an Earnings ESP of +100% and carries a Zacks Rank #3. The company is anticipated to release earnings on Aug 8.
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What's in the Cards for Halliburton (HAL) in Q2 Earnings?
Major oilfield service provider Halliburton Company (HAL - Free Report) is set to release second-quarter 2017 results before the opening bell on Jul 24.
In the preceding three-month period, the Houston, TX-based company reported better-than-expected operating earnings on improved utilization from growing North American rig count.
The world's second-largest oilfield services company after Schlumberger Ltd. (SLB - Free Report) has an incredible history when it comes to beating earnings estimates. The company posted a positive earnings surprise in each of the last four quarters, the average being 68.49%. Investors should note that Halliburton hasn’t missed earnings estimates since mid-2014.
Let’s see how things are shaping up for this announcement.
Halliburton Company Price and EPS Surprise
Halliburton Company Price and EPS Surprise | Halliburton Company Quote
Factors to Consider This Quarter
Drilling activities have increased of late due to an improvement in North American land market. This is likely to help Halliburton witness higher revenues in the domestic markets. During the second quarter, the count of U.S. rigs have increased around 15% to 940. Over the last one year the U.S. rig count has increased around 116%. This increased rig count bodes well for the oilfield service player Halliburton. During the quarter, the international rig counts also rose by about 2%. Halliburton, which generated 48% of its total revenue from international operations in the last quarter, is likely to benefit from the higher international rig count. President Trump’s exit from Paris Climate accord also provided an impetus to drilling activities.
Moreover, the company’s new CEO, Jeff Miller, is contemplating about raising the company’s various services rates, which are likely to boost the revenues of the company. Halliburton expects the prices to increase by at least 10% and in some cases 20% or more this year.
During the quarter, the company acquired the Tulsa-based Summit ESP. We expect Halliburton to gain from this acquisition given that devices manufactured by Summit ESP are in high demand and are being utilized by upstream energy players for extending the life of shale wells. The development is likely to help the company to earn significant cash flow for stockholders. However, the cost of acquisition may weigh on the financials of the company in the quarter. As it is, the company has weak financials with high debt and low cash reserves.
We appreciate Halliburton’s successful cost-management initiatives in the midst of weak oil prices. However, with the rise in North America’s shale oil patch activities, the company is actively engaged in increasing its headcount. Halliburton has increased its active fleet by 30%, which required the company to increase employment by more than one-third of its workforce to 2,700 workers in the Permian Basin. The increased costs on this account might adversely effect earnings.
Further, weaknesses in oil and gas prices could mar demand for oilfield services. During the second quarter, oil and natural gas prices fell 8.4% and 5%, respectively. Lower commodity prices might lead to reduced exploration and production activities. This could lead to lower investments by oil majors which will impact revenues of the oilfield services companies. This is also reflected in the share price of Halliburton which witnessed a decline of around 14% in the second quarter.
Halliburton Company Price
Halliburton Company Price | Halliburton Company Quote
Earnings Whispers
Our proven model does not conclusively show that Halliburton is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +15.79%. This is because the Most Accurate estimate is 22 cents, while the Zacks Consensus Estimate is pegged at 19 cents.
Zacks Rank: Halliburton, under the Zacks categorized Oil and Gas - Field Services industry, currently carries a Zacks Rank #4 (Sell).
Please note that we caution investors against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Stocks Poised to Beat Earnings Estimates
While an earnings beat looks uncertain for Halliburton, here are some energy firms in the same industry you can consider on the basis of our model, which shows that they have the right combination of elements to beat estimates this quarter:
ProPetro Holding Corp.(PUMP - Free Report) is anticipated to release earnings on Aug 8. The company has an Earnings ESP of +100% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
C&J Energy Services, Inc. has an Earnings ESP of +100% and carries a Zacks Rank #3. The company is anticipated to release earnings on Aug 8.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana. Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>