What To Expect From Halliburton’s Stock?

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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 second-quarter results on Wednesday, July 19. We expect HAL’s stock to trade higher due to revenues and earnings beating expectations marginally in its second quarter. Halliburton generated significant returns in 2022 and we do not expect another stellar year in 2023, but rather a moderate one as commodity prices were surprisingly lower than expected this year. HAL also did not generate any free cash flow in Q1 2023, showing that the business has cooled down from the 2022 highs. However, oil prices have jumped over the last week – boosted by a falling U.S. dollar and supply cuts by the world’s biggest oil exporters (Saudi Arabia and Russia). A report released by OPEC also kept an optimistic outlook for world oil demand despite weak economic growth. It raised its growth forecast for 2023 and predicted only a slight slowdown in 2024, with China and India expected to keep driving the expansion in fuel use.

Halliburton has a strong position to benefit from high crude oil prices. The growing tight supplies due to geopolitical uncertainty and the soaring demand from the reopening of China’s economy could likely bode well for energy prices by the end of 2023. 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 10% higher than the current market price. Look at our interactive dashboard analysis on HAL Earnings Preview: What To Expect in Fiscal Q2? for more details.

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

Trefis estimates HAL’s Q2 2023 revenues to be around $5.9 billion, marginally above the consensus estimate. Halliburton saw its revenues jump 33% year-over-year (y-o-y) to $5.7 billion in Q1 2023. HAL’s Q1 revenues in the completion and production segment jumped 45% y-o-y to $3.4 billion, while the drilling and evaluation segment gained 17% to $2.3 billion. These results were driven by increased pressure pumping services and completion tool sales globally and improved artificial lift services in North America and Kuwait. Also, an increase in drilling-related services, along with enhanced wireline and testing services globally, aided in these results. For 2023, we forecast HAL’s Revenues to be $23.8 billion, up 17% y-o-y.

According to the International Energy Agency, the forecast for global liquid fuel production has increased by 1.2 million barrels/day in 2023, primarily because of growth from non-OPEC producers such as the United States, Norway, Canada, Brazil, and Guyana. This growth offsets reduced production in Russia and OPEC.

2) EPS is also likely to marginally beat consensus estimates

HAL’s Q2 2023 earnings per share (EPS) is expected to come in at 76 cents per Trefis analysis, 3 cents above the consensus estimate. In Q1, HAL’s net income surged to $651 million, or $0.72/share, from $263 million, or $0.29/share, in the year-ago period.

(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 portfolio that aims for long-term growth? Here’s a value portfolio that’s done much better than the market since 2016.

Returns Jul 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 HAL Return 13% -5% -31%
 S&P 500 Return 2% 18% 102%
 Trefis Multi-Strategy Portfolio 6% 25% 303%

[1] Month-to-date and year-to-date as of 7/18/2023
[2] Cumulative total returns since the end of 2016

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