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Halliburton (HAL) Up 24.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Halliburton (HAL - Free Report) . Shares have added about 24.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Halliburton due for a pullback? 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 drivers.

Halliburton Q3 Earnings Top Estimates, Sales Miss Mark

Halliburton Company delivered better-than-expected third-quarter 2020 bottom-line performance as the Completion and Production segment outperformed the Zacks Consensus Estimate. The oilfield services company reported earnings of 11 cents per share, beating the Zacks Consensus Estimate of 8 cents.

However, the bottom line tumbled 67.6% from the year-ago figure of 34 cents per share due to lower revenue contribution from North America activities.

Operating income of $142 million also fell from $536 million in the same period last year.

Revenues of $2.98 billion further slumped 46.4% from the year-ago quarter’s sales and missed the Zacks Consensus Estimate of $3.09 billion too. Additionally, North America revenues plunged 66.6% year over year to $984 million. Moreover, revenues from Halliburton’s international operations fell 23.5% from the year-ago period to $1.99 billion.

Outlook

Management at this world’s biggest provider of hydraulic fracking noted that although the activity levels in North America during the September quarter ramped down, the company continues to benefit from the changing market dynamics through an excellent execution and regulation of the controllable factors. As operations in the global markets slow down, the North America industry structure steadily improve with stabilizing activities.

This Houston, TX-based industry player maintains an efficient North America service delivery improvement strategy, a prudent capital management policy and a responsible and competent team. The steady deployment of cutting-edge digital technologies will enhance Halliburton’s efficiency and aid its cost-saving efforts to bode well both for the company as well as its customers. Importantly, Halliburton will not only gain traction from its key concerted efforts but also continue to monitor the commodity price movement, further adjusting itself to the revised capex plans in response to a volatile price scenario.

Segmental Performance

Operating income from the Completion and Production segment came in at $212 million, significantly dropping 52.5% from the year-ago level of $446 million but beating the Zacks Consensus Estimate of $187 million.

The division’s performance was affected by weakness in completion tool sales, internationally, along with lower cementing activity in the Middle East/Asia and North America. These negative impacts were partly offset by an improved stimulation activity and artificial lift sales in North America land, higher activity across multiple product service lines in Argentina as well as increased pipeline services, internationally.

Drilling and Evaluation unit profit declined from $150 million in the third quarter of 2019 to $105 million in the corresponding period of 2020. Moreover, the segmental income underperformed the Zacks Consensus Estimate of $117 million, thanks to ramped-down drilling-related and wireline operations in North America and the Eastern Hemisphere alongside muted project management activity in the Middle East/Asia, partly compensated by a better drilling activity in Latin America.

Balance Sheet

Halliburton’s capital expenditure in the third quarter was $155 million. As of Sep 30, 2020, the company had $2.11 billion in cash/cash equivalents and $9.63 billion in long-term debt, representing a total debt-to-total capitalization of 65%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 42.78% due to these changes.

VGM Scores

Currently, Halliburton has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% 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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