Halliburton (HAL) Down 2.8% Since Last Earnings Report: Can It Recover?

It has been about a month since Halliburton (HAL) last reported earnings. Shares have lost about 2.8% 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 broke a record as both units outperformed

Halliburton Company reported first-quarter 2023 net earnings per share of 72 cents, topping the Zacks Consensus Estimate of 67 cents and well above year-ago quarterly earnings of 35 cents (adjusted). The better results reflect higher-than-expected profits for both divisions and occurred despite the company’s exit from Russia.

Meanwhile, revenues of $5.7 billion were 32.5% ahead of the same-year 2022 period and beat the Zacks Consensus Estimate by approximately $177 million. Revenue in North America increased 43.6% year-over-year to $2.8 billion, while revenue from Halliburton’s international operations increased 23.4% from the year-ago period to $2.9 billion. Investors should note that HAL has above-average exposure to the North American onshore drilling market.

Inside Halliburton’s segments

Completion and Production segment operating income was $666 million, more than doubling from the year-ago level of $296 million and beating the Zacks Consensus Estimate of $629 million. The division’s results were supported by strong positioning in the pressure pump industry and improved sales of finishing tools, as well as solid onshore artificial lift operations in North America and Kuwait.

Earnings for the drilling and evaluation unit increased from $294 million in the first quarter of 2022 to $369 million in the same period of 2022. The division also managed to surpass the Zacks Consensus Estimate of $362 million. This was primarily driven by the recovery of wireline, drilling services and testing services businesses.

Balance

Halliburton saw first-quarter capital expenditure of $268 million. As of March 31, 2023, this Zacks Rank #3 (Hold) company had approximately $1.9 billion in cash/cash equivalents and $7.9 billion in long-term debt, representing a debt-to-cap ratio of 48.4. During January-March, HAL also repurchased its shares worth $100 million.

Management Comments and Outlook

Halliburton – the world’s largest supplier of hydraulic fracturing – noted that strong first-quarter results demonstrate solid execution and strategic priorities in North America, as well as international markets. Looking ahead, the company expects this provision and limited service capabilities to deliver strong margins both domestically and internationally this year and beyond.

Overall, Halliburton believes its smart strategy, digital leadership, capital efficiency and global presence point to an optimistic outlook. The Houston-based company’s ability to generate cash flow and balance sheet strength should also deliver stronger returns for shareholders.

How have estimates changed since then?

It turns out that estimate revisions have been trending upwards over the past month.

VGM results

At this point, Halliburton has a solid Growth Score of B, although it lags slightly behind its Momentum Score of C. Plotting a somewhat similar path, the stock is given a B on the value side, placing it in the second quintile for this investment strategy.

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

Perspectives

Estimates for this company generally show an upward trend, and the scale of these corrections looks promising. Notably, Halliburton carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

Halliburton belongs to the Zacks Oil and Gas – Field Services industry. Another stock in the same industry, Liberty Oilfield Services (LBRT), has gained 3.5% over the past month. More than a month has passed since the company announced its results for the quarter ended March 2023.

In the most recent quarter, Liberty Oilfield Services reported revenues of $1.26 billion, representing a year-over-year change of +59.2%. EPS of $0.90 for the same period compared to -$0.03 a year ago.

Liberty Oilfield Services is expected to report earnings per share of $0.96 for the current quarter, which would represent a year-over-year change of +74.6%. The Zacks Consensus Estimate has remained unchanged over the past 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Liberty Oilfield Services. The stock also has a VGM Rating of A.

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