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Why Its Not Wise to Buy the 12% YTD Drop in Halliburton Stock
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The ongoing selling pressure in Halliburton Company (HAL - Free Report) stock, now more than 23% below its 52-week high, has captured investors' attention. Notably, since the beginning of the year, this oilfield services giant has underperformed its sector, the Zacks Oil and Gas Field Services industry, and the S&P 500 Index.
HAL Year-to-Date Stock Performance
Image Source: Zacks Investment Research
Despite Halliburton's year-to-date decline, as discussed below, the stock presents compelling reasons for caution, making it prudent for investors to give it a miss for now.
Halliburton Disappoints in Q3
Per the latest quarterly print, Halliburton reported adjusted net income per share of 73 cents, missing the Zacks Consensus Estimate of 75 cents and declining from the year-ago profit of 79 cents (adjusted). The weak third-quarter numbers reflect subdued performance in the North American region and the effects of the August cyberattack incident.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Meanwhile, revenues of $5.7 billion were 1.8% lower year over year and missed the Zacks Consensus Estimate of $5.8 billion. North American revenues fell 8.5% year over year to $2.4 billion.
Operating income from the Completion and Production segment was $669 million, down from the year-ago level of $746 million. The division’s performance was dragged down by a dip in U.S. onshore pressure pumping services, deteriorating completion tool sales in North America and Europe/Africa, plus lower stimulation activity in Latin America.
HAL Outlook Looks Weak
With additional seasonal budget exhaustion expected, full-year North American revenues could decline further, limiting Halliburton's domestic growth. This downward trend is anticipated to impact margins, raising concerns over its resilience in the North American market.
Investors should know that HAL’s operations are more heavily weighted toward North America than those of its peers SLB (SLB - Free Report) and Baker Hughes (BKR - Free Report) , leaving it more vulnerable to regional weakness than its rivals. About 40% of Halliburton's business revenues are in North America compared to some 20% for SLB and 25% for BKR.
While Halliburton’s international segment grew 4% year over year, pressure from factors like lower drilling activities in the North Sea and Middle East project delays is creating headwinds. Additionally, any increased OPEC+ production could exacerbate oil supply issues, potentially weakening demand for Halliburton's services in these regions and affecting profitability.
Halliburton Faces Financial Disruptions From Cybersecurity Event
A cybersecurity incident in Q3 temporarily disrupted Halliburton’s billing and collection processes, impacting both free cash flow and earnings per share by approximately 2 cents. This event also forced a pause in share repurchases, impacting shareholder returns. With long-term digitization projects like SAP system upgrades already delayed, this incident highlights potential vulnerabilities
Declining EPS Estimates for HAL
Suggesting the decline in Halliburton’s stock could continue is that 2024 earnings estimates have fallen 4% in the last 30 days to $3 per share compared to EPS estimates of $3.12 a month ago. More concerning and taking away from HAL’s growth narrative is that 2025 EPS estimates have dipped nearly 7% in the past month.
HAL Consensus Estimate Image
Image Source: Zacks Investment Research
Final Word: Avoid HAL
Based on the above analysis, potential investors may want to give Halliburton stock the cold shoulder until the situation shows major signs of improvement.
Halliburton currently carries a Zacks Rank #4 (Sell).
Image: Bigstock
Why Its Not Wise to Buy the 12% YTD Drop in Halliburton Stock
The ongoing selling pressure in Halliburton Company (HAL - Free Report) stock, now more than 23% below its 52-week high, has captured investors' attention. Notably, since the beginning of the year, this oilfield services giant has underperformed its sector, the Zacks Oil and Gas Field Services industry, and the S&P 500 Index.
HAL Year-to-Date Stock Performance
Despite Halliburton's year-to-date decline, as discussed below, the stock presents compelling reasons for caution, making it prudent for investors to give it a miss for now.
Halliburton Disappoints in Q3
Per the latest quarterly print, Halliburton reported adjusted net income per share of 73 cents, missing the Zacks Consensus Estimate of 75 cents and declining from the year-ago profit of 79 cents (adjusted). The weak third-quarter numbers reflect subdued performance in the North American region and the effects of the August cyberattack incident.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Meanwhile, revenues of $5.7 billion were 1.8% lower year over year and missed the Zacks Consensus Estimate of $5.8 billion. North American revenues fell 8.5% year over year to $2.4 billion.
Operating income from the Completion and Production segment was $669 million, down from the year-ago level of $746 million. The division’s performance was dragged down by a dip in U.S. onshore pressure pumping services, deteriorating completion tool sales in North America and Europe/Africa, plus lower stimulation activity in Latin America.
HAL Outlook Looks Weak
With additional seasonal budget exhaustion expected, full-year North American revenues could decline further, limiting Halliburton's domestic growth. This downward trend is anticipated to impact margins, raising concerns over its resilience in the North American market.
Investors should know that HAL’s operations are more heavily weighted toward North America than those of its peers SLB (SLB - Free Report) and Baker Hughes (BKR - Free Report) , leaving it more vulnerable to regional weakness than its rivals. About 40% of Halliburton's business revenues are in North America compared to some 20% for SLB and 25% for BKR.
While Halliburton’s international segment grew 4% year over year, pressure from factors like lower drilling activities in the North Sea and Middle East project delays is creating headwinds. Additionally, any increased OPEC+ production could exacerbate oil supply issues, potentially weakening demand for Halliburton's services in these regions and affecting profitability.
Halliburton Faces Financial Disruptions From Cybersecurity Event
A cybersecurity incident in Q3 temporarily disrupted Halliburton’s billing and collection processes, impacting both free cash flow and earnings per share by approximately 2 cents. This event also forced a pause in share repurchases, impacting shareholder returns. With long-term digitization projects like SAP system upgrades already delayed, this incident highlights potential vulnerabilities
Declining EPS Estimates for HAL
Suggesting the decline in Halliburton’s stock could continue is that 2024 earnings estimates have fallen 4% in the last 30 days to $3 per share compared to EPS estimates of $3.12 a month ago. More concerning and taking away from HAL’s growth narrative is that 2025 EPS estimates have dipped nearly 7% in the past month.
HAL Consensus Estimate Image
Final Word: Avoid HAL
Based on the above analysis, potential investors may want to give Halliburton stock the cold shoulder until the situation shows major signs of improvement.
Halliburton currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.