Back to top

Image: Bigstock

Why an Earnings Beat Is Likely for Halliburton (HAL) in Q2

Read MoreHide Full Article

We expect Halliburton Company (HAL - Free Report) to beat expectations when it reports second-quarter 2018 results on Monday, Jul 23, before market opens. The current Zacks Consensus Estimate for the quarter under review is a profit of 59 cents on revenues of $6,110 million.

In the preceding three-month period, the major oilfield service provider delivered an in-line quarter as robust North American drilling activity on the back of oil pricing strength were offset by problems in Venezuela and frack sand delivery delays.

On a further encouraging note, Halliburton 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, while the shares are down 7.8% so far this year, the drop is less than the collective loss of 9.2% for the stocks in this 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.

Thankfully, as per our model, the trend is likely to be maintained in the second quarter. Evidently, multiple tailwinds have buoyed expectations for world's second-largest oilfield services company after Schlumberger (SLB - Free Report) .

Why a Likely Positive Surprise?

Our proven model shows that Halliburton is likely to beat earnings in the to-be-reported quarter as it has the right combination of two key ingredients. 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.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.14%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Halliburton is #3 Ranked which, when combined with a positive ESP, makes us confident of earnings beat. 

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.

What is Driving the Better-Than-Expected Earnings?

With crude prices having gone up and stabilized, investment in drilling activities (especially in North American shale) are on the rise. Halliburton, owning bulk of the North American shale drilling market, should be the prime beneficiary of this trend. As a result, the company’s earnings and cash flows are likely to remain robust in coming quarters. In particular, Halliburton’s premier position in the prolific Permian Basin – which is experiencing a huge ramp up in production growth – will ensure improving returns.

As a proof of the resurgence in activities, the Zacks Consensus Estimate for second-quarter Completion and Production revenue is pegged at $4,105 million, higher than $3,807 million reported in the previous quarter and significantly above the second-quarter 2017 sales of $3,132 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.

Other Stocks to Consider

Halliburton is not the only energy firm looking up this earnings season. Here are some companies from the space which, according to our model, also have the right combination of elements to post earnings beat this quarter.

ConocoPhillips (COP - Free Report) has an Earnings ESP of +10.78% and a Zacks Rank #1. The firm is expected to release earnings on Jul 26. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Anadarko Petroleum Corporation has an Earnings ESP of +15.52% and a Zacks Rank #2. The company is anticipated to release earnings on Jul 31.

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>>


Unique Zacks Analysis of Your Chosen Ticker


Pick one free report - opportunity may be withdrawn at any time


Schlumberger Limited (SLB) - $25 value - yours FREE >>

Halliburton Company (HAL) - $25 value - yours FREE >>

ConocoPhillips (COP) - $25 value - yours FREE >>

Published in