Up 7% This Year, Will Halliburton’s Gains Continue Following 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 23. We expect HAL’s stock to trade higher with revenues and earnings beating market expectations marginally in its first quarter. Halliburton’s completion and production division revenue in Q4 was up 4% y-o-y to $3.3 billion and the operating income margin was 22%. On the other hand, the drilling and evaluation division’s revenue grew 1% y-o-y to $2.4 billion in Q4 and the operating income margin was 17%. That said, the company achieved record margins in both its divisions in Q4 2023 and we expect a similar momentum in the upcoming quarter as well. It is anticipated that Halliburton’s services will continue to be in high demand at current oil prices ($87 at the time of writing) and that the market for high-quality services and equipment will remain tight, allowing the company to continue increasing average revenue per rig. The supply cuts from Saudi Arabia and Russia, and persistent demand in Europe (which is the third largest oil consumer after the U.S. and China), have helped build a more supportive environment for oil prices currently. 

HAL stock has seen extremely strong gains of 100% from levels of $20 in early January 2021 to around $39 now, vs. an increase of about 35% 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?

Our forecast indicates that HAL’s valuation is $44 per share, which is 16% 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 beat consensus estimates marginally

Trefis estimates HAL’s Q1 2024 revenues to be around $5.8 billion, slightly ahead of the consensus estimate. Halliburton saw its revenues increase 3% year-over-year (y-o-y) to $5.74 billion in Q4. Its North American revenue fell 7.2% to $2.4 billion, driven primarily by decreased stimulation activity in U.S. land drilling. This segment accounts for 55% of the company’s total revenues. So, it will be interesting to see how this division’s revenue fares in the upcoming first-quarter results. Its International revenue rose to $3.3 billion in Q4, particularly reflecting increased oilfield activity in the Middle East and Africa. For 2024, we forecast HAL’s Revenues to be $24.7 billion, up 7% y-o-y.

2) EPS also likely to come in ahead of consensus estimates

HAL’s Q1 2024 earnings per share (EPS) is expected to come in at 76 cents per Trefis analysis, marginally beating the consensus estimate. Its reported Q4 net income increased to $661 million, or $0.74/share, from $656 million, or $0.72/share, in the year-earlier quarter. The company mentioned that Q4 margins remained flat sequentially in the U.S. on reduced activity in the region and Mexico.

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

Going by our HAL’s Valuation, with an EPS estimate of around $3.39 and a P/E multiple of 13.1x in fiscal 2024, this translates into a price of $44, which is almost 16% 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 Apr 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 HAL Return -2% 7% -29%
 S&P 500 Return -5% 5% 124%
 Trefis Reinforced Value Portfolio -7% -1% 606%

[1] Returns as of 4/19/2024
[2] Cumulative total returns since the end of 2016

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