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Think Twice About Buying the 20% YTD Dip in Halliburton Stock
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As Halliburton Company (HAL - Free Report) experiences a significant downturn, now trading just 7% above its 52-week low, investors might be tempted to see this as a buying opportunity. However, a deeper look reveals reasons for caution. The oilfield services giant — down 19.6% in 2024 — has not only underperformed its peers in the Zacks Oil and Gas Field Services industry but has also lagged behind the broader S&P 500 Index year to date.
HAL Year-to-Date Stock Performance
Image Source: Zacks Investment Research
Halliburton’s Disappointing Q3 Results
Halliburton’s latest quarterly report offered little comfort to its investors. The company reported adjusted net income per share of 73 cents, falling short of the Zacks Consensus Estimate of 75 cents. This figure also marked a decline from the prior year’s adjusted profit of 79 cents. The weak third-quarter numbers reflect subdued activity in the North American region and the effects of the August cyberattack incident. Revenues dipped 1.8% year over year to $5.7 billion, missing projections of $5.8 billion.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
North America, a critical market for Halliburton, bore the brunt of this underperformance. Regional revenues plummeted 8.5% year over year to $2.4 billion. The Completion and Production segment faced setbacks, with operating income dropping to $669 million from $746 million in the previous year. Weak demand for U.S. onshore pressure pumping services, declining completion tool sales in multiple regions, and subdued stimulation activity in Latin America weighed heavily on results.
HAL Faces Challenging Outlook for North America
Halliburton’s significant exposure to the North American market — where approximately 40% of its revenues are generated — poses a key risk. This dependency is much higher than its peers like SLB (SLB - Free Report) or Baker Hughes (BKR - Free Report) — 20% and 25%, respectively — making the company more vulnerable to regional weakness.
The North American market is projected to face further seasonal budget exhaustion, potentially dragging down full-year revenues. Margins are also likely to suffer, raising concerns about HAL’s ability to maintain its competitive edge.
Meanwhile, the international segment showed modest growth, up 4% year over year. However, challenges such as decreased drilling activity in the North Sea and project delays in the Middle East cast a pall on HAL’s prospects. Additionally, if OPEC+ nations increase production, it could disrupt global oil supply dynamics, reducing demand for Halliburton’s services and putting further pressure on profitability.
Cybersecurity Breach Adds to Halliburton’s Troubles
A cybersecurity incident in Q3 further complicated Halliburton’s situation. This breach disrupted billing and collection processes, impacting free cash flow and earnings per share by an estimated 2 cents. It also forced the company to suspend its share repurchase program temporarily, limiting shareholder returns.
Long-term digitization projects, such as SAP system upgrades, were already delayed prior to this incident. The breach underscores potential operational vulnerabilities that could weigh on HAL’s future performance and investor confidence.
Declining Earnings Estimates Signal More Pain Ahead for HAL
Adding to investor concerns, earnings estimates for Halliburton have been revised downward. Projections for 2024 EPS have dropped by 4% over the past two months to $3.00, while 2025 estimates fell by more than 8% in the same period. This downward trend erodes Halliburton’s growth narrative and suggests that its challenges are far from over.
Image Source: Zacks Investment Research
A Word on Halliburton’s Valuation
From a valuation perspective, while Halliburton might appear attractive relative to the subindustry, it is still trading above its 3-year low. Going by the forward price-to-earnings (P/E) ratio, the company is trading at a forward earnings multiple of 9.33, higher than its 3-year low of 8.10. We don’t think that this premium is justified given the company’s softening North American activity and pressure on margins.
Image Source: Zacks Investment Research
Conclusion: HAL Stock to Avoid—for Now
Despite Halliburton’s prominent position in the oilfield services sector, its recent struggles make it a risky bet. Weak Q3 results, growing challenges in North America, international headwinds, and cybersecurity issues all point to a difficult road ahead. With declining earnings estimates and a Zacks Rank #4 (Sell), Halliburton stock is not the bargain it may appear to be. Investors would be wise to wait for clear signs of improvement before considering an entry.
Image: Bigstock
Think Twice About Buying the 20% YTD Dip in Halliburton Stock
As Halliburton Company (HAL - Free Report) experiences a significant downturn, now trading just 7% above its 52-week low, investors might be tempted to see this as a buying opportunity. However, a deeper look reveals reasons for caution. The oilfield services giant — down 19.6% in 2024 — has not only underperformed its peers in the Zacks Oil and Gas Field Services industry but has also lagged behind the broader S&P 500 Index year to date.
HAL Year-to-Date Stock Performance
Halliburton’s Disappointing Q3 Results
Halliburton’s latest quarterly report offered little comfort to its investors. The company reported adjusted net income per share of 73 cents, falling short of the Zacks Consensus Estimate of 75 cents. This figure also marked a decline from the prior year’s adjusted profit of 79 cents. The weak third-quarter numbers reflect subdued activity in the North American region and the effects of the August cyberattack incident. Revenues dipped 1.8% year over year to $5.7 billion, missing projections of $5.8 billion.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
North America, a critical market for Halliburton, bore the brunt of this underperformance. Regional revenues plummeted 8.5% year over year to $2.4 billion. The Completion and Production segment faced setbacks, with operating income dropping to $669 million from $746 million in the previous year. Weak demand for U.S. onshore pressure pumping services, declining completion tool sales in multiple regions, and subdued stimulation activity in Latin America weighed heavily on results.
HAL Faces Challenging Outlook for North America
Halliburton’s significant exposure to the North American market — where approximately 40% of its revenues are generated — poses a key risk. This dependency is much higher than its peers like SLB (SLB - Free Report) or Baker Hughes (BKR - Free Report) — 20% and 25%, respectively — making the company more vulnerable to regional weakness.
The North American market is projected to face further seasonal budget exhaustion, potentially dragging down full-year revenues. Margins are also likely to suffer, raising concerns about HAL’s ability to maintain its competitive edge.
Meanwhile, the international segment showed modest growth, up 4% year over year. However, challenges such as decreased drilling activity in the North Sea and project delays in the Middle East cast a pall on HAL’s prospects. Additionally, if OPEC+ nations increase production, it could disrupt global oil supply dynamics, reducing demand for Halliburton’s services and putting further pressure on profitability.
Cybersecurity Breach Adds to Halliburton’s Troubles
A cybersecurity incident in Q3 further complicated Halliburton’s situation. This breach disrupted billing and collection processes, impacting free cash flow and earnings per share by an estimated 2 cents. It also forced the company to suspend its share repurchase program temporarily, limiting shareholder returns.
Long-term digitization projects, such as SAP system upgrades, were already delayed prior to this incident. The breach underscores potential operational vulnerabilities that could weigh on HAL’s future performance and investor confidence.
Declining Earnings Estimates Signal More Pain Ahead for HAL
Adding to investor concerns, earnings estimates for Halliburton have been revised downward. Projections for 2024 EPS have dropped by 4% over the past two months to $3.00, while 2025 estimates fell by more than 8% in the same period. This downward trend erodes Halliburton’s growth narrative and suggests that its challenges are far from over.
Image Source: Zacks Investment Research
A Word on Halliburton’s Valuation
From a valuation perspective, while Halliburton might appear attractive relative to the subindustry, it is still trading above its 3-year low. Going by the forward price-to-earnings (P/E) ratio, the company is trading at a forward earnings multiple of 9.33, higher than its 3-year low of 8.10. We don’t think that this premium is justified given the company’s softening North American activity and pressure on margins.
Conclusion: HAL Stock to Avoid—for Now
Despite Halliburton’s prominent position in the oilfield services sector, its recent struggles make it a risky bet. Weak Q3 results, growing challenges in North America, international headwinds, and cybersecurity issues all point to a difficult road ahead. With declining earnings estimates and a Zacks Rank #4 (Sell), Halliburton stock is not the bargain it may appear to be. Investors would be wise to wait for clear signs of improvement before considering an entry.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.