What to Watch For In Halliburton’s Stock Post Q4?

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Halliburton stock (NYSE: HAL), an energy company organized into exploration, development, and production of oil and natural gas, is scheduled to report its fiscal fourth-quarter results on Tuesday, January 24. We expect HAL’s stock to trade lower due to revenues and earnings missing expectations marginally in its fourth quarter. The oil market is impacted by several different factors, most of which are particularly unpredictable right now. Despite the healthy demand for physical crude oil, certain economic factors stand to dampen the outlook for oil demand. Covid-19 cases are once again rising in China, and the country’s struggle to get its Covid cases under control could impact the demand in the world’s largest crude oil importer. In addition, the continued rising interest rates in the U.S. and the fragile global economy that’s vulnerable to inflation also pose a threat to the oil market. It should be noted that the current oil pricing environment could have only partially worked its way into HAL’s earnings, given the long planning horizons and contract-driven nature of the services industry.

Halliburton mentioned that it was hurt by the wind-down and sale of its Russia business to its local management team. In the nine months that ended September 30, the company recorded $366 million in charges and impairments, largely due to the sale of its Russia assets and the impairment of assets in Ukraine.

Our forecast indicates that HAL’s valuation is $37 per share, which is about 8% lower than the current market price. Look at our interactive dashboard analysis on HAL Earnings Preview: What To Expect in Fiscal Q4? for more details.

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(1) Revenues expected to be slightly below consensus estimates

Trefis estimates HAL’s Q4 2022 revenues to be around $5.5 billion, marginally below the consensus estimate. The company saw better-than-expected Q3 results with revenues jumping 39% year-over-year (y-o-y) to $5.36 billion. To break down the revenues by geography, North American business grew more than 63% y-o-y to 2.6 billion, Middle East/Asia rose by 31% y-o-y to 1.2 billion, and Latin America grew by 35% y-o-y to $841 million. The Europe/Africa/CIS business was down 5% to $639 million in Q3. For 2022, we forecast HAL’s Revenues to be $20.4 billion, up 34% y-o-y.

The rig count figures in the U.S. were almost 28% lower than pre-pandemic levels of 2019 (as of January 17, 2023). This shortage of rigs is expected as the oil industry was brutally over-downsized for several years before the present energy supply crunch. Consequently, we expect that HAL’s revenues in 2022 will still remain below the 2019 pre-pandemic levels.

2) EPS is also likely to marginally miss consensus estimates

HAL’s Q4 2022 earnings per share (EPS) is expected to come in at 65 cents per Trefis analysis, 2 cents below the consensus estimate. In Q3, the company’s net income surged to $544 million, or $0.60 per share from $109 million, or $0.26 per share, in the year-earlier period. HAL’s Q3 adjusted operating margin of 16% rose 393 basis points from the year-earlier figure.

(3) Stock price estimate lower than the current market price

Going by our HAL’s Valuation, with an EPS estimate of around $2.08 and a P/E multiple of 17.6x in fiscal 2022, this translates into a price of $37, which is almost 8% lower than the current market price. It should be noted that shares of the company have surged about 43% in the past year, rising alongside much of the energy sector.

It is helpful to see how its peers stack up. HAL Peers shows how Halliburton’s stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Jan 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 HAL Return 2% 2% -26%
 S&P 500 Return 2% 2% 74%
 Trefis Multi-Strategy Portfolio 5% 5% 231%

[1] Month-to-date and year-to-date as of 1/20/2023
[2] Cumulative total returns since the end of 2016

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