Major oilfield services provider
Halliburton Company
(
HAL
) is scheduled to report its third quarter 2012 results on
Wednesday, October 17 before the opening bell.
The Zacks Consensus Estimate for the to-be-reported quarter is a
profit of 68 cents per share (with a downside risk of 2.94%) on
revenues of $7.2 billion. In the year-ago quarter, Halliburton
recorded a gain of 94 cents per share, while sales came in at $6.5
billion.
Second Quarter Recap
Halliburton's second-quarter 2012 results came in better than
expected, helped by higher activity in the international markets,
partially offset by weak North America results.
Earnings per share from continuing operations came in at 80 cents,
beating the Zacks Consensus Estimate of 75 cents and flat year over
year.
Revenues of $7.2 billion were 21.9% greater than that achieved
during the second quarter of 2011 and also surpassed the Zacks
Consensus Estimate of $6.9 billion, as sales increased across the
company's business units.
(Read our full coverage on this earnings report:
International Biz Lifts Halliburton
).
Points to Ponder for Third Quarter
Halliburton enjoys a strong competitive position within the global
oilfield services markets. We like the company's broad and
technologically-complex product and service offerings, along with
its robust financial profile.
It remains the best-positioned company in the U.S. pressure pumping
market, with significant acreage positions in the highest profile
plays, such as the Haynesville, Eagle Ford shale and Bakken.
However, certain issues in North America - characterized by
depressed natural gas fundamentals and cost inflation - will
adversely impact its third quarter results.
Additionally, the North American land rig count may plateau in the
near future as growth in highly-productive horizontal drilling has
led to a natural gas supply overhang and relatively weak natural
gas prices in the U.S. market. This is likely to be only partially
offset by the continued growth of oil- and liquids-rich reservoirs.
A slowdown in U.S. land drilling will impair Halliburton's
business.
Moreover, a substantial relief in the cost for guar gum - a key
constituent of the company's market-leading hydraulic fracturing
('fracking') procedure - is not expected until 2013.
Agreement of Analysts
As a result of the above-mentioned factors, there has been a
downward bias among Halliburton's September quarter estimate
revisions, particularly over the past 30 days. Out of the 24
estimates for the third quarter of 2012, 9 have been revised
downwards, while none have gone in the opposite direction.
Magnitude of Estimate Revisions
As a result of estimates being revised southward over the past 30
days, the Zacks Consensus Estimate for the quarter has dropped by 3
cents (from 71 cents to 68 cents).
Surprise History
The company has a history of positive earnings surprises,
surpassing the Zacks Consensus Estimate in each of the last 4
quarters. Halliburton has performed consistently during this period
with its average earnings surprise being 3.34%. This implies that
the company has beaten the Zacks Consensus Estimate by 3.34% over
the last four quarters.
However, this time around, we do not expect Halliburton - the
second largest member of the oilfield services contingent after
Schlumberger Limited
(
SLB
) - to surpass expectations, as it has been struggling to cope with
the sluggish North American rig activity, adversely affecting its
margins and overall profitability.
Rating & Recommendation
Halliburton currently retains a Zacks #3 Rank (short-term Hold
rating). We are also maintaining our long-term Neutral
recommendation on the stock.
HALLIBURTON CO (HAL): Free Stock Analysis
Report
SCHLUMBERGER LT (SLB): Free Stock Analysis
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