Halliburton Stock Likely To See Higher Levels Post Q1 Results

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Halliburton

Halliburton stock (NYSE: HAL), an energy company organized into the exploration, development, and production of oil and natural gas, is scheduled to report its fiscal first-quarter results on Tuesday, April 25. We expect HAL’s stock to trade higher due to revenues and earnings beating expectations marginally in its first quarter. Halliburton possesses strong positions to benefit from the current crude oil price cycle which is expected to last for some time due to underinvestment in oil and gas upstream capex in recent years. In 2022, higher oil and gas prices gave producers the confidence to increase their capital spending which drove demand for the company’s equipment and services. Consequently, Halliburton’s revenue rose 33% year-over-year (y-o-y) to $20.3 billion and its operating income rose 50% y-o-y to $2.7 billion in 2022. That enabled the oil-field services giant to produce growing free cash flow – which was used to strengthen its balance sheet and return additional capital to shareholders through a higher dividend and the resumption of its share repurchase program.

We believe the macro backdrop that underpins a strong multiyear upcycle for energy remains very compelling in both oil and gas and in low-carbon energy resources. The growing tight supplies due to geopolitical uncertainty and the soaring demand from the reopening of China’s economy will likely bode well for energy prices in 2023. Multiple tailwinds remain in place for 2023, and the activity outlook abroad remains robust, especially in the Middle East, offshore, and North American markets.

Our forecast indicates that HAL’s valuation is $41 per share, which is about 22% higher than the current market price. Look at our interactive dashboard analysis on HAL Earnings Preview: What To Expect in Fiscal Q1? for more details.

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(1) Revenues expected to be slightly ahead of consensus estimates

Trefis estimates HAL’s Q1 2023 revenues to be around $5.6 billion, marginally above the consensus estimate. Halliburton saw its revenues jump 30% year-over-year (y-o-y) to $5.58 billion in Q4 2022. HAL’s Q4 revenues in the completion and production segment jumped 35% y-o-y to $3.2 billion, while the drilling and evaluation segment gained 25% to $2.4 billion. By geographic region, North American revenue surged 46% y-o-y to $2.6 billion, Latin America revenues grew 41% y-o-y to $945 million, and Middle East/Asia revenues increased 25% to $1.4 billion. Europe/Africa/CIS region saw a 10% decline in revenues due to the company’s exit from Russia. For 2023, we forecast HAL’s Revenues to be $23.8 billion, up 17% y-o-y.

According to the International Energy Agency, even with the prospect of a recession in some markets, demand is expected to grow by 2 million barrels per day this year to a record 101.9 million barrels per day. Because these market dynamics will spur new drilling activity, HAL should likely be able to flex its pricing power as both land drilling and offshore activity increase.

2) EPS is also likely to marginally beat consensus estimates

HAL’s Q1 2023 earnings per share (EPS) is expected to come in at 70 cents per Trefis analysis, 3 cents above the consensus estimate. In Q4, HAL’s net income fell to $656 million, or $0.72 per share from $824 million, or $0.92 per share, in the year-earlier period. The company utilized $409 million in tax benefits during the comparative period which explains the bottom line coming in higher in Q4 2021. It should be noted that the operating margins expanded significantly from 12.9% in Q4 2021 to 17.5% in Q4 2022.

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

Going by our HAL’s Valuation, with an EPS estimate of around $3.07 and a P/E multiple of 13.3x in fiscal 2023, this translates into a price of $41, which is almost 22% higher than the current market price.

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 Apr 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 HAL Return 7% -14% -37%
 S&P 500 Return 1% 8% 85%
 Trefis Multi-Strategy Portfolio 2% 10% 245%

[1] Month-to-date and year-to-date as of 4/20/2023
[2] Cumulative total returns since the end of 2016

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