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Halliburton (HAL) Q3 Earnings Meet Estimates, Revenues Miss

Zacks Equity Research

Halliburton Company HAL reported in-line third quarter profit as robust international activity offset headwinds in North America. The world's second-largest oilfield services company after Schlumberger SLB saw its net income come in at 34 cents per share, same as the Zacks Consensus Estimate.

However, the bottom line was 32% below the year-earlier quarter's earnings. Operating income reported by Halliburton was $536 million, well below the $716 million for the same period last year.

Meanwhile, revenues of $5.6 billion were 10.1% lower than the year-ago quarter and missed the Zacks Consensus Estimate of $5.8 billion. North American revenue fell 21.1% year over year to $2.9 billion. Revenue from Halliburton’s international operations rose 6.9% from the year-ago period to $2.6 billion, an area that continues to exhibit growth momentum.

Halliburton Company Price, Consensus and EPS Surprise


Halliburton Company Price, Consensus and EPS Surprise

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

Management’s Outlook

The world’s biggest provider of hydraulic fracking noted that North American activity levels in the third quarter declined but the company continues to successfully ride the changing market dynamics through excellent execution and management of the controllable factors.

Meanwhile, Halliburton is witnessing broad-based, steady recovery in its international business. This is clearly reflected by the 10% increase in the region’s year-to-date sales.  The company still anticipates its international revenue to grow at a high single-digit rate in 2019. Importantly, Halliburton sees customers reviving spending across multiple regions outside North America.

Even as the company continues to face a challenging business landscape in North America, it is looking to boost free cash flow generation and improve returns.

Segmental Performance

Operating income from the Completion and Production segment was $446 million, 27.2% below the year-ago level of $613 million and marginally missing our consensus estimate of $451 million.

The division’s performance was affected by weakness in pressure pumping fundamentals in the North American land sector, lower completion tool sales in Latin America and tepid stimulation activity in Middle East/Asia. These negative impacts were partly offset by excellent result from the Eastern Hemisphere cementing business, increased completion tool sales in Europe/Africa/CIS and improved stimulation job in Latin America.

Drilling and Evaluation unit profit fell from $181 million in the third quarter of 2018 to $150 million in the corresponding period of 2019. The segment income was also below the Zacks Consensus Estimate of $173 million.

These results were primarily due to lower drilling and wireline activity in North America, as well as decreased project management activity in Middle East/Asia. The setbacks were partly offset by increased drilling activity in the Eastern Hemisphere, improved fluids business in Latin America and increase in testing and software revenues worldwide.

Balance Sheet

Halliburton’s capital expenditure in the third quarter was $345 million. As of Sep 30, 2019, the company had approximately $1.6 billion in cash/cash equivalents and $10.3 billion in long-term debt, representing a debt-to-capitalization ratio of 51.4%.

Zacks Rank & Stock Picks

Halliburton currently carries a Zacks Rank #3 (Hold). Meanwhile, investors interested in the oilfield services space could look at some better options like Helix Energy Solutions Group, Inc. HLX and Subsea 7 SA SUBCY that sport 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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