Why Is Halliburton (HAL) Down 17% Since the Last Earnings Report?

A month has gone by since the last earnings report for Halliburton CompanyHAL . Shares have lost about 17% in the past month, underperforming the market.

Will the recent negative trend continue leading up to its next earnings release, or is HAL 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 catalysts.

Recent Earnings

Halliburton reported better-than-expected fourth quarter profit thanks to improved utilization and pricing gains in North America -- the company's largest market by sales. With higher commodity prices supporting the surge in oil production and drilling activity, the company issued an upbeat outlook.

The world's second-largest oilfield services company after Schlumberger saw its income from continuing operations (adjusted for Venezuela write-downs and charges associated with U.S. tax reform) come in at 53 cents per share, above the Zacks Consensus Estimate of 46 cents -- the fourteenth consecutive quarterly outperformance. Moreover, revenues of $5,940 million beat the Zacks Consensus Estimate of $5,567 million.

Strong North America, and Improving International Market

Along the results, Halliburton also sounded optimistic in its view that the North American land market is improving rapidly, driven by increased utilization and pricing, particularly for pressure pumping. As it is, rig counts have generally been rising during the last one and half years since plunging to an all-time low of 404 in May 2016, with the addition of a flood of new units. As a proof of the recovery, Halliburton grew its Completion and Production unit revenue grew 8% sequentially, ahead of the U.S. land rig count growth.

Additionally, the outlook for Halliburton's international market continues to improve. In fact, regional sales were up 11% sequentially in the fourth-quarter, driven by strong activity gains across a number of product services lines in Latin America, as well as increases in drilling and stimulation activity in the Eastern Hemisphere.

Segmental Performance

Operating income from the Completion and Production segment was $552 million, significantly higher than the year-ago level of $85 million. The division also improved from previous quarter's income of $525 million, helped by improved pressure pumping activity and pricing in the North American land market. Further, Halliburton experienced a year-end bump in the Gulf of Mexico completion tool sales, while software sales in Latin America and stimulation activity in the Eastern Hemisphere were higher as well.

Meanwhile, Drilling and Evaluation unit profit improved from $248 million in the fourth quarter of 2016 to $291 million this year. The number was also above the $180 million earned in the September quarter. The outperformance was on account of higher drilling activity in the Middle East and North America. This was supported by higher software sales and services in Latin America.

Balance Sheet

Halliburton's capital expenditure in the fourth quarter was $439 million. For the full year, capital spending was $1,373 million.

As of Dec 31, 2017, the company had approximately $2,337 million in cash/cash equivalents and $10,430 million in long-term debt, representing a debt-to-capitalization ratio of 55.5%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter compared to two lower.

Halliburton Company Price and Consensus

Halliburton Company Price and Consensus | Halliburton Company Quote

VGM Scores

At this time, HAL has an average Growth Score of C, however its Momentum is doing a bit better with a B. However, the stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.


Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, HAL has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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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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