It has been about a month since the last earnings report for Halliburton (HAL). Shares have lost about 11.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Halliburton due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Halliburton Q3 Earnings Beat on International Strength
Halliburton reported slightly higher-than-expected third-quarter profit after robust international activity more than offset slowdown in the North American drilling fluids demand and pricing pressure in the United States land drilling business.
The company saw its income from continuing operations come in at 50 cents per share, just ahead of the Zacks Consensus Estimate of 49 cents and well above the year-ago profit of 42 cents. Meanwhile, revenues of $6,172 million beat the Zacks Consensus Estimate of $6,131 million and increased 13.4% year over year.
Importantly, Halliburton joined fellow oil services biggie Schlumberger in affirming rebounding activity in the international markets. As proof of resurgence, Halliburton saw its sales from outside North America go up 5% sequentially, with growth in each region.
Operating income from the Completion and Production segment was $613 million, 16.3% above the year-ago level of $527 million. The division's performance was helped by higher completion tool sales and well intervention services in the Eastern Hemisphere, coupled with improved stimulation activity in Mexico.
However, the segment operating income could not match our consensus estimate of $641 million. The shortfall could be attributed to pricing pressure and higher maintenance costs in the North American land drilling business.
Meanwhile, Drilling and Evaluationunit profit fell from $186 million in the third quarter of 2017 to $181 million this year. The segment income was also below the Zacks Consensus Estimate of $219 million. The underperformance was on account of lower drilling fluids activity in North America.
Halliburton's capital expenditure in the third quarter was $409 million. As of Sep 30, 2018, the company had approximately $2,057 million in cash/cash equivalents and $10,424 million in long-term debt, representing a debt-to-capitalization ratio of 53.6%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -20.37% due to these changes.
Currently, Halliburton has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Halliburton has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.