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Why Is Halliburton (HAL) Up 2.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for Halliburton (HAL - Free Report) . Shares have added about 2.8% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Halliburton Q4 Earnings Beat Estimates

Halliburton Company reported fourth-quarter 2021 adjusted net income per share of 36 cents, beating the Zacks Consensus Estimate of 34 cents. The company had reported a profit of 18 cents in the year-ago quarter. The outperformance reflects stronger-than-expected profit from its Drilling and Evaluation division.

Meanwhile, revenues of $4.3 billion were 32.1% higher than the year-ago quarter and ahead of the Zacks Consensus Estimate of $4.1 billion. North American revenues rose 44% year over year to $1.8 billion, while revenues from Halliburton’s international operations were up 24.8% from the year-ago period to $2.5 billion.

In more good news for investors, Halliburton raised its quarterly dividend by 167% to 12 cents per share (or 48 cents per share annualized). Further, as part of its ongoing commitment to debt reduction, the company announced that it will partly redeem its $1 billion of senior notes due in 2025.

Inside Halliburton’s Segments

Coming back to HAL, operating income from the Completion and Production segment was $347 million, 23% above the year-ago level of $282 million. The division’s performance was buoyed by improving completion tool sales worldwide, and strength in the pressure pumping business across onshore North America and Middle East/Asia.

However, the segment's profit missed the Zacks Consensus Estimate of $351 million due to lower stimulation activity in Latin America, Canada, and the Gulf of Mexico, tepid well intervention work in Brazil, weak pipeline services in Europe/Africa/CIS and Asia, to go with disappointing artificial lift activity in North America land.

Drilling and Evaluation unit profit surged from $117 million in the fourth quarter of 2020 to $269 million in the corresponding period of 2021. The division also managed to beat the Zacks Consensus Estimate of $229 million. This was primarily due to overall increased drilling-associated activities, higher wireline operations in Guyana, as well as increased software revenues in Latin America and Middle East/Asia, an uptick in project management activity in Ecuador and India, together with a pick-up in wireline operations in the Middle East/Asia region.

Balance Sheet

Halliburton, reported fourth-quarter capital expenditure of $316 million. For the full year, HAL’s spending totaled $799 million – in line with its guidance. As of Dec 31, 2021, the company had approximately $3 billion in cash/cash equivalents and $9.1 billion in long-term debt, representing a debt-to-capitalization ratio of 57.6%.

Management’s Outlook

Halliburton — the world’s biggest provider of hydraulic fracking — noted that its execution remained solid throughout 2021. Looking ahead, the company expects industry fundamentals to stay supportive, which will spur growth in both North American and the overseas markets. Halliburton believes that it is perfectly placed to benefit from this emerging multi-year upcycle based on its smart strategy, digital leadership, capital efficiency, while aiming for a sustainable energy future. 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 estimates review.

VGM Scores

At this time, Halliburton has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Halliburton has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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