Halliburton Company (HAL Quick QuoteHAL - Free Report) is set to release third-quarter results on Nov. 7. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at a profit of 80 cents per share on revenues of $6 billion.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Let’s delve into the factors that might have influenced the oilfield service firm’s performance in the September quarter. But it’s worth taking a look at HAL’s previous-quarter performance first.

Highlights of Q2 Earnings & Surprise History

In the last reported quarter, this Houston, TX-based provider of technical products and services to drillers of oil and gas wells met the consensus mark, buoyed by strength in the international markets. Halliburton reported adjusted net income per share of 80 cents, meeting the Zacks Consensus Estimate. However, revenues of $5.8 billion missed the Zacks Consensus Estimate by some $123 million due to weak performance in the North American region.

HAL beat the Zacks Consensus Estimate in three of the last four quarters and met in the other, with the average earnings surprise being 3.2%. This is depicted in the graph below:

The Zacks Consensus Estimate for the third-quarter bottom line has been unchanged in the past seven days. The estimated figure indicates a 5.1% fall year over year. The Zacks Consensus Estimate for revenues, however, suggests a marginal 0.4% increase from the year-ago period.

Factors to Consider

After bouncing back strongly from the depths of the pandemic, the oil and natural gas rig count in the United States has gradually declined over the past year. Consequently, drilling activity — an important factor for services companies — has hit a speed bump. In the United States, a region on which Halliburton is highly dependent, the rig count has decreased around 18% from a year ago. The steady decline in rig count is worrying for contracting activity.

Consequently, our expectation for third-quarter revenues for the North American region is pegged at $2.4 billion, indicating an 8.7% decline from the year-ago quarter due to a soft operating environment. This is likely to have weighed on the company’s earnings and cash flows.
The increase in HAL’s costs might have dragged down the company’s to-be-reported bottom line. Going by our model, the company’s third-quarter cost of sales is likely to have totaled $4.7 billion, up 1.1% from the year-ago period. The upward cost trajectory could be attributed to the prevailing inflationary environment.

But giving some respite to the company, our projection for the third-quarter operating income of the Drilling & Evaluation segment is pegged at $425.3 million, indicating a 12.5% improvement from the year-ago quarter on the back of Halliburton’s strategic positioning in key markets and its capability to capitalize on regional demand surges, especially in the Middle East and certain countries of Latin America.

What Does Our Model Say?

The proven Zacks model does not conclusively predict an earnings beat for Halliburton for the third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of a beat. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.97%.

Zacks Rank: HAL currently carries a Zacks Rank #3.

Stocks to Consider

While an earnings beat looks uncertain for Halliburton, here are some firms from the energy space that you may want to consider on the basis of our model:

Sunoco LP (SUN Quick QuoteSUN - Free Report) has an Earnings ESP of +13.44% and a Zacks Rank #3. The firm is scheduled to release earnings on Nov. 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

The 2024 Zacks Consensus Estimate for Sunoco indicates 154.3% year-over-year earnings per share growth. Valued at around $7.8 billion, SUN has lost 3.7% in a year.

TC Energy Corporation (TRP Quick QuoteTRP - Free Report) has an Earnings ESP of +3.07% and a Zacks Rank #3. The firm is scheduled to release earnings on Nov. 7.

TC Energy has a trailing four-quarter earnings surprise of 12%, on average. Valued at around $48.1 billion, TRP has gained 27.7% in a year.

Helmerich & Payne (HP Quick QuoteHP - Free Report) has an Earnings ESP of +2.90% and a Zacks Rank #3. The firm is scheduled to release earnings on Nov. 13.

Helmerich & Payne has a trailing four-quarter earnings surprise of 14.8%, on average. Valued at around $3.3 billion, HP has lost 19.9% in a year.