Halliburton (HAL) Up 1.4% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Halliburton (HAL). Shares have added about 1.4% in that time frame, underperforming the market.
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 its most recent earnings report in order to get a better handle on the important drivers.
Second-Quarter 2018 Results
Halliburton reported lower-than-expected second quarter profit after robust North American land drilling activity on the back of oil pricing strength were more than offset by reduced pressure pumping services in the Middle East, decreases in completion tool salesin Europe/Africa/CIS and decline in Gulf of Mexico drilling activity.
The oilfield services company saw its income from continuing operations come in at 58 cents per share, just shy of the Zacks Consensus Estimate of 59 cents. Meanwhile, revenues of $6,147 million beat the Zacks Consensus Estimate of $6,110 million.
Importantly, Halliburton joined fellow oil services biggies Schlumberger and Baker Hughes, a GE Company in affirming increased activity in the U.S. shale, driven by strong oil and gas production in response to an improving crude environment.
Segmental Performance
Operating income from the Completion and Production segment was $669 million, significantly higher than the year-ago level of $397 million. The division’s performance was helped by continued growth in the North American land drilling business. Further, Halliburton experienced a bump in the Europe/Africa/CIS pressure pumping services, while completion tool sales in the Middle East were higher as well.
However, the segment operating income could not match our consensus estimate of $688 million. The shortfall could be attributed to lower completion tool salesin Europe/Africa/CIS and decreases in pressure pumping services in the Middle East.
Meanwhile, Drilling and Evaluationunit profit improved from $125 million in the second quarter of 2017 to $191 million this year. The outperformance was on account of higher drilling activity in the domestic land sector, improved drilling services and project management activity in the Middle East and India, as well as higher software sales in Mexico.
But the segment income was below the Zacks Consensus Estimate of $199 million. Results were hampered by lower drilling fluid activity in the Gulf of Mexico.
Balance Sheet
Halliburton’s capital expenditure in the second quarter was $565 million. As of Jun 30, 2018, the company had approximately $2,058 million in cash/cash equivalents and $10,427 million in long-term debt, representing a debt-to-capitalization ratio of 54.1%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Halliburton has a strong Growth Score of A, though it is lagging a lot on the momentum front with a C. Following the exact same course, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise HAL has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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