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

A month has passed since Halliburton’s (HAL) last earnings report. Shares have lost about 6.1% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Halliburton poised 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 key drivers.

Halliburton’s first-quarter earnings beat estimates

Halliburton reported first-quarter 2024 adjusted net earnings per share of 76 cents, beating the Zacks Consensus Estimate of 74 cents and improving year-over-year quarterly earnings by 72 cents (adjusted). The improved performance reflects strength in international markets, partially offset by weak performance in the North America region.

Meanwhile, revenues of $5.8 billion were 2.2% ahead of the same-year period in 2023 and topped the Zacks Consensus Estimate of $5.7 billion.

Inside Halliburton’s regions and segments

North American revenues declined 7.9% year-over-year to $2.4 billion, also missing our forecast of $2.6 billion. On the other hand, Halliburton’s international revenue increased 11.9% from the year-ago period to $3.3 billion, exceeding our estimate of $3.1 billion.

Operating income from Assembling and production segment revenue was USD 688 million, up from USD 666 million a year earlier and above our forecast of USD 660.4 million. The division’s performance improved through improved finishing tool sales in the Western Hemisphere and Europe/Africa, improved stimulus activity in Latin America, and increased artificial lift activity in North America. These factors were partially offset by lower-pressure pumping activity onshore in the US.

Drilling and evaluation unit profit increased from USD 369 million in the first quarter of 2023 to USD 398 million in the same period of 2024. Our model estimated this amount at USD 398.8 million. These results can be attributed to higher levels of well services in the Middle East and North America, increasing levels of product line activity in Latin America and the growth of liquid services in Europe. This was partially offset by deterioration in fluids services in Asia, reduced project management work in the Middle East/Asia and reduced wireline activity in North America.

Balance

Halliburton reported first-quarter capital expenditures of $330 million, lower than our forecast of $338.7 million. As of March 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-cap ratio of 44.1. During January-March, HAL also repurchased its shares worth $250 million. In the first quarter, the company generated $487 million in operating cash flow, which resulted in free cash flow of $206 million.

The story continues

Management Comments and Outlook

Halliburton — the world’s largest supplier of hydraulic fracturing — noted that the company’s strategy and solid execution were key to its strong first-quarter performance. According to HAL, activity in North America rebounded from fourth-quarter lows, while international activity generated year-over-year growth for the 11th consecutive quarter. HAL, which generated an impressive $2.3 billion of free cash flow in 2023, sees its multi-year customer business plans across markets and asset types as evidence of the strength and duration of this growth cycle.

How have estimates changed since then?

Investors have witnessed a downward trend in estimate revisions over the past month.

VGM results

Right now, Halliburton has an average growth score of C, a rating with the same momentum score. Charting a somewhat similar path, the stock was rated a B for value, putting it in the top 40% for this investment strategy.

Overall, the stock has a composite VGM score of B. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. Notably, Halliburton carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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