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Halliburton (HAL) Down 6.2% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Halliburton (HAL - Free Report) . Shares have lost about 6.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Halliburton due for a breakout? 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 catalysts.

Halliburton Q3 Earnings & Revenues Beat Estimates

Halliburton reported third-quarter 2023 adjusted net income per share of 79 cents, surpassing the Zacks Consensus Estimate of 77 cents and well above the year-ago quarter profit of 60 cents (adjusted). The outperformance reflects stronger-than-expected profit from its Completion and Production division.

Meanwhile, revenues of $5.8 billion were 8.3% higher than the corresponding period of 2022 but came below the Zacks Consensus Estimate (by some $35 million) on tepid sales from North America.

Inside Halliburton’s Regions & Segments

North American revenue edged down 1% year over year to $2.6 billion, which also failed to meet our projection of $2.8 billion. Revenue from Halliburton’s international operations was up 17.4% from the year-ago period to $3.2 billion but falling short of our estimate of $3.1 billion.

Operating income from the Completion and Production segment was $746 million, up significantly from the year-ago level of $583 million and ahead of our projection of $708.8 million. The division’s performance was buoyed by the strength in Eastern Hemisphere cementing job, higher stimulation activity in the overseas markets, to go with robust completion tool sales globally.

Drilling and Evaluation unit profit improved from $325 million in the third quarter of 2022 to $378 million in the corresponding period of 2023. However, the division could not manage to beat our estimate of $401.4 million. This was primarily due to a decline in drilling-associated services, tepid project management activity and lower software sales in Mexico, partly offset by a pickup in fluid services in the Middle East/Asia and Latin America, plus strong wireline activity in Latin America and Europe/Africa.

Balance Sheet

Halliburton reported third-quarter capital expenditure of $409 million, slightly higher than our projection of $403.5 million. As of Sep 30, 2023, the company had approximately $2 billion in cash/cash equivalents and $7.8 billion in long-term debt, representing a debt-to-capitalization ratio of 45.9. HAL also bought back $198 million worth its stock during the July-September period. The company generated $874 million of cash flow from operations in the third quarter, leading to free cash flow of $511 million.

Management Remarks & Outlook

Halliburton — the world’s biggest provider of hydraulic fracking — noted that the strong third-quarter performance is a thumbs-up to its solid execution and strategic priorities in North America as well as international markets. Looking ahead, the company expects this recipe, and the long-term oilfield services demand, to drive a strong and sustained upcycle.  

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.


 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Halliburton has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 broadly 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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