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Halliburton (HAL) Down 6.1% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Halliburton (HAL). Shares have lost about 6.1% 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 the most recent earnings report in order to get a better handle on the important drivers.

Halliburton Q1 Earnings Beat Estimates

Halliburton reported first-quarter 2024 adjusted net income per share of 76 cents, surpassing the Zacks Consensus Estimate of 74 cents and improving from the year-ago quarter profit of 72 cents (adjusted). The outperformance reflects strength in the international markets, partly offset by weak performance in the North American region.

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Meanwhile, revenues of $5.8 billion were 2.2% higher than the corresponding period of 2023 and above the Zacks Consensus Estimate of $5.7 billion.

Inside Halliburton’s Regions & Segments

North American revenues fell 7.9% year over year to $2.4 billion, which also failed to meet our projection of $2.6 billion. On the other hand, revenues from Halliburton’s international operations were up 11.9% from the year-ago period to $3.3 billion and ahead of our estimate of $3.1 billion.

Operating income from the Completion and Production segment was $688 million, up from the year-ago level of $666 million and above our projection of $660.4 million. The division’s performance was buoyed by improving completion tool sales in the Western Hemisphere and Europe/Africa, better stimulation activity in Latin America, to go with higher artificial lift activity in North America. These factors were partly offset by lower pressure pumping activity in U.S. onshore.

Drilling and Evaluation unit profit improved from $369 million in the first quarter of 2023 to $398 million in the corresponding period of 2024. Our model estimated the figure at $398.8 million. This performance could be attributed to higher drilling-related services in in the Middle East and North America, rising activity levels across Latin America product lines plus a pickup in fluid services in Europe. Partly offsetting these positives were the decline in Asia fluid services, a dip in project management work in the Middle East/Asia, and reduced wireline activity in North America.

Balance Sheet

Halliburton reported first-quarter capital expenditure of $330 million, lower than our projection of $338.7 million. As of Mar 31, 2024, the company had approximately $1.9 billion in cash/cash equivalents and $7.6 billion in long-term debt, representing a debt-to-capitalization ratio of 44.1. HAL also bought back $250 million worth its stock during the January-March period. The company generated $487 million of cash flow from operations in the first quarter, leading to free cash flow of $206 million.

Management Remarks & Outlook

Halliburton — the world’s biggest provider of hydraulic fracking — noted that the company’s strategy and solid execution were the key to its strong first-quarter results. As per HAL, North American activity bounced back from the fourth quarter lows, while its international business generated year-over-year growth for the 11th successive quarter. HAL, which generated an impressive $2.3 billion of free cash flow in 2023, sees the clients’ multi-year activity plans across markets and asset types as proof in the strength and duration of this upcycle.


 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, Halliburton has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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