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Why Is Halliburton (HAL) Up 0.2% Since Last Earnings Report?

It has been about a month since the last earnings report for Halliburton (HAL). Shares have added about 0.2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Halliburton due for a pullback? 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 catalysts.

Halliburton Q3 Earnings Beat Estimates

Halliburton Company reported third-quarter 2022 adjusted net income per share of 60 cents, surpassing the Zacks Consensus Estimate of 56 cents and improving from the year-ago profit of 28 cents. The outperformance reflects stronger-than-expected profit from both its divisions and came in spite of the company’s exit from Russia.

Revenues of $5.4 billion were 38.8% higher than the corresponding period of 2021 and above the Zacks Consensus Estimate of $5.3 billion. North American revenues rose 63.2% year over year to $2.6 billion, while revenues from Halliburton’s international operations were up 21.2% from the year-ago period to $2.7 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 $583 million, 81.1% above the year-ago level of $322 million and ahead of the Zacks Consensus Estimate of $536 million. The division’s performance was buoyed by improving completion tool sales in Middle East/Asia, to go with the strength in the pressure pumping business in North America onshore.

Drilling and Evaluation unit profit surged from $186 million in the third quarter of 2021 to $325 million in the corresponding period of 2022. The division also managed to beat the Zacks Consensus Estimate of $308 million. This was primarily due to a pickup in drilling-associated services in the Western Hemisphere and Middle East/Asia, as well as increased project management activity and wireline services overseas.

Balance Sheet

Halliburton reported third-quarter capital expenditure of $251 million. As of Sep 30, 2022, the company had approximately $2 billion in cash/cash equivalents and $7.9 billion in long-term debt, representing a debt-to-capitalization ratio of 50.9.

Management Remarks & Outlook

Halliburton — the world’s biggest provider of hydraulic fracking — noted that the strong third-quarter performance is a thumbs-up to its strategic priorities in North America as well as international markets.

Looking ahead, Halliburton expects international activity to gain momentum throughout the globe. The company’s state-of-the-art portfolio, selective contract wins and balanced geographic mix will help it maximize profit from this upcycle. As far as North America is concerned, HAL sees continued revenue growth in a tight market.  

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.
 

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Halliburton has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 looks promising. It comes with little surprise Halliburton has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Halliburton belongs to the Zacks Oil and Gas - Field Services industry. Another stock from the same industry, Liberty Oilfield Services (LBRT), has gained 0.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

Liberty Oilfield Services reported revenues of $1.19 billion in the last reported quarter, representing a year-over-year change of +81.8%. EPS of $0.78 for the same period compares with -$0.22 a year ago.

Liberty Oilfield Services is expected to post earnings of $0.70 per share for the current quarter, representing a year-over-year change of +333.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +5.7%.

Liberty Oilfield Services has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.

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