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Halliburton (HAL) Beats on Q2 Earnings, Paints Rosy Outlook

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Halliburton Company (HAL - Free Report) reported second-quarter 2022 adjusted net income per share of 49 cents, surpassing the Zacks Consensus Estimate of 45 cents and well above the year-ago quarter profit of 26 cents. The outperformance reflects stronger-than-expected profit from both its divisions.

Meanwhile, revenues of $5.1 billion were 36.9% higher than the corresponding period of 2021 and came ahead of the Zacks Consensus Estimate of $4.7 billion. North American revenue rose 54.6% year over year to $2.4 billion, while revenues from Halliburton’s international operations were up 23.9% from the year-ago period to $2.6 billion. Investors should know that HAL has outsized exposure to the North American land drilling market.

Inside Halliburton’s Segments

Operating income from the Completion and Production segment was $499 million, 57.4% above the year-ago level of $317 million and ahead of the Zacks Consensus Estimate of $447 million. The division’s performance was buoyed by improving completion tool sales worldwide, strength in the pressure pumping business in the Western Hemisphere, higher cementing activity in the Eastern Hemisphere, to go with demand uptick for Halliburton’s artificial lift work in North America land and Kuwait.

Drilling and Evaluation unit profit surged from $175 million in the second quarter of 2021 to $286 million in the corresponding period of 2022. The division also managed to beat the Zacks Consensus Estimate of $274 million. This was primarily due to overall increased fluid services and wireline activity, a pick-up in Latin American drilling services, as well as increased project management activity in Latin America and the Middle East.

Balance Sheet

Halliburton reported second-quarter capital expenditure of $221 million. As of Jun 30, 2022, the company had approximately $2.2 billion in cash/cash equivalents and $8.5 billion in long-term debt, representing a debt-to-capitalization ratio of 54.4%.

Management Remarks & Outlook

Halliburton — the world’s biggest provider of hydraulic fracking — noted that the strong second-quarter performance is a thumbs-up to its strategic priorities in North America as well as international markets.

Looking ahead, Halliburton expects its international business to experience multi-year growth based on the company’s state-of-the-art portfolio and balanced geographic mix. As far as North America is concerned, HAL sees a steadily growing, tight market, from which it should be able to benefit.  

Overall, Halliburton believes that its smart strategy, digital leadership, capital efficiency, and the global presence points to a rosy outlook. The Houston-based company’s cash flow generation capabilities and balance sheet strength should also ensure increased shareholder returns.

Zacks Rank & Key Pick

Halliburton currently carries a Zacks Rank #2 (Buy).

Apart from HAL, investors interested in the energy sector might look at Cheniere Energy (LNG - Free Report) , BP plc (BP - Free Report) and Valero Energy (VLO - Free Report) . Each of the companies sports a Zacks Rank #1 (Strong Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Cheniere Energy: Cheniere Energy is valued at some $31.6 billion. The Zacks Consensus Estimate for LNG’s 2022 earnings has been revised 39.9% upward over the past 90 days.

Cheniere Energy, headquartered in Houston, TX, delivered a 120.1% beat in Q1. LNG shares have gained around 56.5% in a year.

BP: Devon Energy is valued at some $89.4 billion. The Zacks Consensus Estimate for BP’s 2022 earnings has been revised 12% upward over the past 60 days.

BP, headquartered in London, delivered a 36.2% beat in Q1. BP shares have gained around 18.4% in a year.

Valero Energy: VLO beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 84.3%, on average.

Valero Energy is valued at around $42.7 billion. VLO has seen its shares gain around 71.7% in a year.