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Halliburton (HAL) Q1 Earnings Top on International Activity

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Halliburton Company (HAL - Free Report) delivered better-than-expected first-quarter 2020 earnings as robust international activity offset headwinds in North America.

The world's second-largest oilfield services company after Schlumberger (SLB - Free Report) reported earnings of 31 cents per share, surpassing the Zacks Consensus Estimate of 25 cents. Moreover, the bottom line was 34.8% higher than the year-ago figure of 23 cents.

Operating loss of $571 million was against $365 million of operating income in the same period last year.

Revenues of $5 billion were 12% lower than the year-ago quarter and marginally missed the Zacks Consensus Estimate by $9 million. North American revenues plunged 25% year over year to $2.5 billion. However, revenues from Halliburton’s international operations rose 5% from the year-ago period to $2.6 billion, an area that continues to perform impressively.

Outlook

Management at this world’s biggest provider of hydraulic fracking noted that although North American activity levels in the first quarter ramped down, the company continues to successfully ride on the changing market dynamics through excellent execution and regulation of the controllable factors.

Notably, Halliburton is witnessing the twin shocks of coronavirus-forced demand depletion and the supply glut. While the latter part of the first quarter experienced the slowdown in activity across different regions, the company feels that the full impact of the coronavirus pandemic and the oil price slump will only be felt in the upcoming quarters. The crisis is expected to leave a deeper impact on the North American land operations that will see a severe decline during the second quarter and be persistently weak throughout the remaining year.

Even as the company relentlessly battles a challenging business landscape in North America, it is looking to boost free cash flow generation and improve returns. This Houston, TX-based industry player plans to curb its overhead and other expenses by $1 billion. It further limits its capital investment budget to $800 million and aims to better its working capital resource.

Importantly, Halliburton will not only be aided by its key concerted efforts but will also continue to monitor the commodity price movement, further adjusting itself to the revised capex plans in response to a volatile price scenario.

Halliburton Company Price, Consensus and EPS Surprise

Halliburton Company Price, Consensus and EPS Surprise

Halliburton Company price-consensus-eps-surprise-chart | Halliburton Company Quote

Segmental Performance

Operating income from the Completion and Production segment came in at $345 million, falling 6.25% below the year-ago level of $368 million but beating the Zacks Consensus Estimate of $344 million.

The division’s performance was affected by weakness in pressure pumping activity and pricing along with diminished completion tool sales in North America. These negative impacts were partly offset by excellent outcomes of the Eastern Hemisphere cementing business and increased completion tool sales globally.

Drilling and Evaluation unit profit rose from $123 million in the first quarter of 2019 to $217 million in the corresponding period of 2020. Moreover, the segmental income outperformed the Zacks Consensus Estimate of $164 million.

The segmental results were primarily driven by higher drilling activity in the North Sea and Asia. The positives were partly offset by lower activity and pricing across a number of product service lines in North America as well as decreased fluids activity in Latin America.

Balance Sheet

Halliburton’s capital expenditure in the first quarter was $213 million. As of Mar 31, 2020, the company had $1.38 billion in cash/cash equivalents and $9.63 billion in long-term debt, representing a debt-to-capitalization ratio of 58.46%.

Zacks Rank & Key Picks

Halliburton currently carries a Zacks Rank #3 (Hold). Investors interested in the energy space can look at some better-ranked options like Magellan Petroleum Corporation (TELL - Free Report) and Murphy USA Inc. (MUSA - Free Report) , both stocks holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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