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Why an Earnings Beat Is Unlikely for Halliburton (HAL) in Q1
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Major oilfield service provider Halliburton Company (HAL - Free Report) is scheduled to report its first-quarter 2018 results on Monday, Apr 23, before market opens. The current Zacks Consensus Estimate for the quarter under review is a profit of 41 cents on revenues of $5,760 million.
In the preceding three-month period, the company delivered a positive earnings surprise of 15.2% thanks to improved utilization and pricing gains in North America -- the company’s largest market by sales.
On a further encouraging note, 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. Investors should note that Halliburton hasn’t missed earnings estimates since mid-2014, as you can see in the chart below:
Even pricewise, the stock has done better than the peer group so far this year; it is up 4.5% in 2018 as against 0.2% loss for the Zacks Oil and Gas Field Services industry.
Investors are keeping their fingers crossed and hoping that Houston, TX-based provider of technical products and services to drillers of oil and gas wells surpasses earnings estimate this time too.
Unfortunately, as per our model, the trend is likely to be broken in the first quarter. Evidently, multiple headwinds including fracking sand logistics issues have dampened expectations.
Thus, while U.S. activity continues to accelerate and margins remain strong, Halliburton’s underlying results are unlikely to come ahead of our expectations. The tepid sentiment surrounding the stock can be gauged from the fact that the estimate revision trend has been negative with four downward estimate revisions and none up in the last month.
Let’s delve deep to find out the factors likely to impact Halliburton’s third-quarter results.
Factors to Consider This Quarter
With U.S. rig count falling to record levels in 2016, oilfield services players (like Halliburton) were hit hard. Unprecedented declines in activity levels and a sharp fall in upstream spending led to lower revenues and pricing headwinds. However, as commodity prices steadily improve and drilling activities pick up, the market for services companies is on the mend.
The U.S. oil benchmark wrapped up a strong quarter amid continued declines in domestic inventories and an improving supply-demand narrative. With fundamentals pointing to a tighter market, the first quarter of the year saw U.S. oil benchmark attain its highest settlement since December 2014.
Consequently, spending on exploration projects have experienced a much-awaited rebound. The energy explorers, buoyed by the jump in commodity prices, are set for improving sales and earnings – a part of which is likely to be pocketed by the oilfield service providers. In particular, the North American land market is improving rapidly, driven by increased utilization and pricing -- particularly for pressure pumping.
As a proof of the resurgence in activities, the Zacks Consensus Estimate for first-quarter Completion and Production revenue is pegged at $3,822 million, higher than $3,804 million reported in the previous quarter and way above the first-quarter 2017 sales of $2,604 million. To put things in perspective, the Completion and Production unit makes up around two-thirds of the oilfield service provider’s total revenue and operating income.
However, cost inflation triggered by increased fracking sand pricing is likely to drag down the company's bottom line. Rising prices of sand – used to hydraulically fracture new wells – increases the expense associated with the drilling of a new shale well and puts upward pressure on the cost of contractors like Halliburton.
As it is, Halliburton had to shell out more to purchase the sand from spot markets to minimize the impact on client completion timelines after extreme weather and rail shut-downs disrupted deliveries.
Earnings Whispers
Our proven model does not conclusively show that Halliburton will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. 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 -3.42%.
Zacks Rank: Halliburton is #3 Ranked. Though a Zacks Rank of 3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
While earnings beat looks uncertain for Halliburton, here are some energy companies you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
EQT Corporation (EQT - Free Report) has an Earnings ESP of +21.86% and a Zacks Rank #3. The company is anticipated to release earnings on Apr 26.
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Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.
Image: Bigstock
Why an Earnings Beat Is Unlikely for Halliburton (HAL) in Q1
Major oilfield service provider Halliburton Company (HAL - Free Report) is scheduled to report its first-quarter 2018 results on Monday, Apr 23, before market opens. The current Zacks Consensus Estimate for the quarter under review is a profit of 41 cents on revenues of $5,760 million.
In the preceding three-month period, the company delivered a positive earnings surprise of 15.2% thanks to improved utilization and pricing gains in North America -- the company’s largest market by sales.
On a further encouraging note, 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. Investors should note that Halliburton hasn’t missed earnings estimates since mid-2014, as you can see in the chart below:
Halliburton Company Price and EPS Surprise
Halliburton Company Price and EPS Surprise | Halliburton Company Quote
Even pricewise, the stock has done better than the peer group so far this year; it is up 4.5% in 2018 as against 0.2% loss for the Zacks Oil and Gas Field Services industry.
Investors are keeping their fingers crossed and hoping that Houston, TX-based provider of technical products and services to drillers of oil and gas wells surpasses earnings estimate this time too.
Unfortunately, as per our model, the trend is likely to be broken in the first quarter. Evidently, multiple headwinds including fracking sand logistics issues have dampened expectations.
Thus, while U.S. activity continues to accelerate and margins remain strong, Halliburton’s underlying results are unlikely to come ahead of our expectations. The tepid sentiment surrounding the stock can be gauged from the fact that the estimate revision trend has been negative with four downward estimate revisions and none up in the last month.
Let’s delve deep to find out the factors likely to impact Halliburton’s third-quarter results.
Factors to Consider This Quarter
With U.S. rig count falling to record levels in 2016, oilfield services players (like Halliburton) were hit hard. Unprecedented declines in activity levels and a sharp fall in upstream spending led to lower revenues and pricing headwinds. However, as commodity prices steadily improve and drilling activities pick up, the market for services companies is on the mend.
The U.S. oil benchmark wrapped up a strong quarter amid continued declines in domestic inventories and an improving supply-demand narrative. With fundamentals pointing to a tighter market, the first quarter of the year saw U.S. oil benchmark attain its highest settlement since December 2014.
Consequently, spending on exploration projects have experienced a much-awaited rebound. The energy explorers, buoyed by the jump in commodity prices, are set for improving sales and earnings – a part of which is likely to be pocketed by the oilfield service providers. In particular, the North American land market is improving rapidly, driven by increased utilization and pricing -- particularly for pressure pumping.
As a proof of the resurgence in activities, the Zacks Consensus Estimate for first-quarter Completion and Production revenue is pegged at $3,822 million, higher than $3,804 million reported in the previous quarter and way above the first-quarter 2017 sales of $2,604 million. To put things in perspective, the Completion and Production unit makes up around two-thirds of the oilfield service provider’s total revenue and operating income.
However, cost inflation triggered by increased fracking sand pricing is likely to drag down the company's bottom line. Rising prices of sand – used to hydraulically fracture new wells – increases the expense associated with the drilling of a new shale well and puts upward pressure on the cost of contractors like Halliburton.
As it is, Halliburton had to shell out more to purchase the sand from spot markets to minimize the impact on client completion timelines after extreme weather and rail shut-downs disrupted deliveries.
Earnings Whispers
Our proven model does not conclusively show that Halliburton will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. 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 -3.42%.
Zacks Rank: Halliburton is #3 Ranked. Though a Zacks Rank of 3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
While earnings beat looks uncertain for Halliburton, here are some energy companies you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
ConocoPhillips (COP - Free Report) has an Earnings ESP of +3.33% and a Zacks Rank #3. The firm is expected to release earnings on Apr 26. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
EQT Corporation (EQT - Free Report) has an Earnings ESP of +21.86% and a Zacks Rank #3. The company is anticipated to release earnings on Apr 26.
Can Hackers Put Money INTO Your Portfolio?
Earlier this year, credit bureau Equifax announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.
Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.
Download the new report now>>