Falling 6% Already This Year, Will Halliburton Stock Reverse This After Q4 Results?

HAL: Halliburton logo

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 fourth-quarter results on Tuesday, January 23. We expect HAL’s stock to likely trade higher with revenues and earnings beating market expectations in its fourth quarter. In Q3 2023, HAL’s North American revenue fell 1% year-over-year (y-o-y) to $2.6 billion, driven primarily by decreased pressure pumping services in U.S. land and lower well intervention services in the Gulf of Mexico. This segment accounts for almost 45% of the company’s total revenues. So, it will be interesting to see how this division’s revenue fares in the upcoming fourth quarter results. That said, the North American land market could result in an activity plateau in the near term due to lower-than-expected natural gas prices and capital restraint by private exploration & production operators. On the other hand, the company’s international and offshore markets continue to experience a strong resurgence of activity driven by resilient long-cycle development and capacity expansion projects. While supply cuts from Saudi Arabia and Russia have helped to build a more supportive environment for oil prices currently, any signs of a potential economic slowdown in the U.S. could lead to questions about demand in the short run.

According to the International Energy Agency, global liquid fuel production is expected to increase by 0.6 million barrels/day in 2024, primarily because of growth from non-OPEC producers such as the United States, Norway, Canada, Brazil, and Guyana. 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 in the long-run.

HAL stock has seen extremely strong gains of 75% from levels of $20 in early January 2021 to around current levels, vs. an increase of about 30% for the S&P 500 over this roughly 3-year period. However, the increase in HAL stock has been far from consistent. Returns for the stock were 21% in 2021, 72% in 2022, and -8% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that HAL underperformed the S&P in 2021 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Energy sector including XOM, CVX, and COP, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could HAL face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

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Our forecast indicates that HAL’s valuation is $43 per share, 27% higher than the current market price. Look at our interactive dashboard analysis on HAL Earnings Preview: What To Expect in Fiscal Q4? for more details.

(1) Revenues expected to come in ahead of consensus estimates

Trefis estimates HAL’s Q4 2023 revenues to be around $5.9 billion, slightly ahead of the consensus estimate. Halliburton saw its revenues jump 8% year-over-year (y-o-y) to $5.8 billion in Q3. The company’s Q3 International revenue increased 17% y-o-y to $3.2 billion. By segment, Completion and Production revenue rose 11% y-o-y to $3.5 billion, driven by increased completion tool sales globally and higher artificial lift activity in North America, while Drilling and Evaluation revenue gained 4% to $2.3 billion, primarily due to an increase in fluid services globally, and higher drilling activity in the Western Hemisphere and Saudi Arabia. For FY 2023, we forecast HAL’s Revenues to be $23.5 billion, up 16% y-o-y.

2) EPS is also likely to beat consensus estimates

HAL’s Q4 2023 earnings per share (EPS) is expected to come in at 82 cents per Trefis analysis, marginally beating the consensus estimate. The company’s Q3 net income increased to $716 million, or $0.79 per share, from $544 million, or $0.60 per share, in the year-earlier quarter,

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

Going by our HAL’s Valuation, with an EPS estimate of around $3.08 and a P/E multiple of 13.8x in fiscal 2023, this translates into a price of $43, which is almost 27% 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.

Returns Jan 2024
MTD [1]
Since start
of 2023 [1]
Total [2]
 HAL Return -6% -14% -37%
 S&P 500 Return 1% 26% 116%
 Trefis Reinforced Value Portfolio -1% 37% 604%

[1] Returns as of 1/22/2024
[2] Cumulative total returns since the end of 2016

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