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Halliburton (HAL) Q2 Earnings Top Estimates, Sales Miss Mark

Halliburton Company HAL delivered better-than-expected second-quarter 2020 earnings as both the Completion and Production segment and the Drilling and Evaluation segment outperformed the Zacks Consensus Estimate.

The world's second-largest oilfield services company after Schlumberger SLB reported earnings of 5 cents per share. The Zacks Consensus Estimate was of a loss of 11 cents per share.

However, the bottom line tumbled 85.7% from the year-ago figure of 35 cents per share due to lower revenue contribution from North America activities.

Operating loss of $1.9 billion was against $303 million of operating income in the same period last year.

Revenues of $3.2 billion slumped 46% from the year-ago quarter’s sales and also missed the Zacks Consensus Estimate of $3.26 billion. Further, North America revenues plunged 68.5% year over year to $1 billion. Moreover, revenues from Halliburton’s international operations fell 19.2% from the year-ago period to $2.1 billion.

Outlook

Management at this world’s biggest provider of hydraulic fracking noted that although the activity levels in North America during the June quarter ramped down, the company continues to benefit from the changing market dynamics through an excellent execution and regulation of the controllable factors.

Even as the company relentlessly battles against a challenging business landscape in North America, it is looking to boost free cash flow generation and improve returns. This Houston, TX-based industry player maintains an efficient North America service delivery improvement strategy, a prudent capital management policy and a responsible and competent team. The steady deployment of cutting-edge digital technologies will enhance Halliburton’s efficiency and aid its cost-saving efforts to bode well both for the company as well as its customers. Importantly, Halliburton will not only gain traction from its key concerted efforts but also continue to monitor the commodity price movement, further adjusting itself to the revised capex plans in response to a volatile price scenario.

Halliburton Company Price, Consensus and EPS Surprise

Halliburton Company Price, Consensus and EPS Surprise

Halliburton Company price-consensus-eps-surprise-chart | Halliburton Company Quote

Segmental Performance

Operating income from the Completion and Production segment came in at $159 million, significantly dropping 66.2% from the year-ago level of $470 million but beating the Zacks Consensus Estimate of $23.77 million.

The division’s performance was affected by weakness in pressure pumping activity, primarily in U.S. land and Latin America along with lower artificial lift activity in U.S. land. These negative impacts were partly offset by improved completion tool sales, internationally.

Drilling and Evaluation unit profit declined from $145 million in the second quarter of 2019 to $127 million in the corresponding period of 2020 due to a global reduction in drilling-related services and weak software sales, internationally. However, the segmental income outperformed the Zacks Consensus Estimate of $94 million.

Balance Sheet

Halliburton’s capital expenditure in the second quarter was $142 million. As of Jun 30, 2020, the company had $1.81 billion in cash/cash equivalents and $9.64 billion in long-term debt, representing a total debt-to-total capitalization of 65%.

Zacks Rank & Key Picks

Halliburton currently carries a Zacks Rank #3 (Hold). Investors interested in the energy space can look at some better-ranked stocks like Royal Dutch Shell PLC RDS.A and TC PipeLines, LP TCP, both holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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