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Halliburton (HAL) Earnings Beat Suggests Optimism In North America

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Shares of Halliburton (HAL) are trading slightly lower in the Monday’s pre-market session, falling about 1% after the Houston-based oil services specialist reported mixed fourth quarter fiscal 2016 earnings results. Despite a miss on the top line, which continue to suffer from weak demand, Halliburton’s overall results point to improvements in North America — its largest revenue region.

Halliburton shares closed at $56.45 on Friday, up about 2%, but trading about 8% below its consensus 12-month price target was $62. With oil prices beginning to rebound, thanks to the production freeze by OPEC countries, Halliburton stock — still 15% below its 2014 high — could be a solid turnaround candidate for investors looking to play a rebound in energy. Let’s go through the numbers.

For the three months that ended December, the oil and gas services company posted adjusted diluted earnings per share of 4 cents on revenues of $4.02 billion. This compares to the year-ago quarter when the company earned 31 cents per share on $5.08 billion in revenue. This translates too a 2-cent beat on bottom line, bus a slight miss on the top. Despite the revenue miss, the strong showing in North America is encouraging.

Revenue from North America, which accounts for about 45% of Halliburton’s total revenue, rose 8.7% to $1.8 billion in the fourth quarter from the third quarter. The growth was due to oil producers putting more rigs back to work in North American shale fields. During the quarter, the average U.S. rig count rose by more than a fifth. Notably, this comes after rig counts hit a multi-year low in May.

"We gained significant market share through the downturn, and as the market stabilized we leveraged this share to drive margin improvement," said CEO Dave Lesar, in a statement. "This market share improvement continued in the fourth quarter as we outgrew our primary competitor in North America, Latin America and the Eastern Hemisphere."

Lesar’s confident tone suggests Halliburton, the world's No. 2 oilfield services provider, is gaining ground on market leader Schlumberger (SLB), which last week reported a more than 8% decline in fourth quarter revenue. Schlumberger, which said it didn’t expect a "dramatic" short-term recovery in international markets, was echoed by Halliburton.

"Despite the positive sentiment surrounding the North American land market, it is important to remember that our world is still a tale of two cycles. The North America market appears to have rounded the corner, but the international downward cycle is still playing out,” Lesar said. Unlike Schlumberger, however, Halliburton is not as exposed to international markets, which — for the time being — may give it a slight edge over its largest rival.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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