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Halliburton (HAL) Down 3.6% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
·4 min read

It has been about a month since the last earnings report for Halliburton (HAL). Shares have lost about 3.6% 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 drivers.

Halliburton Q2 Earnings Beat Estimates

Halliburton Company 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.
 

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How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Halliburton has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, 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 has been net zero. It comes with little surprise Halliburton has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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