Bear of the Day: Halliburton (HAL)
Halliburton Company (HAL) can do nothing but wait as crude prices continue to fall. This Zacks Rank #5 (Strong Sell) is still expected to see declining earnings again this year.
Halliburton provides services and products to the energy industry worldwide. It offers products to customers from exploration to drilling to well construction and completion to optimizing production.
A Beat in Q4 But Revenue Continues to Fall
On Jan 25, Halliburton reported its fourth quarter and full year results. While it beat the Zacks Consensus, the bigger story continues to be the decline in revenue.
Total revenue for the year fell 28% to $23.6 billion as the energy market struggled but that outperformed the 35% decline in the average worldwide rig count and global drilling and completions.
One brighter spot was the international business, where revenue fell "just" 16% year over year. North American revenue, however, declined 39% as companies continued to shut down their rigs.
The company also remains on track to acquire Baker Hughes, despite market conditions.
Estimates Cut for 2016 and 2017
Halliburton still expects 2016 to be "challenging." None of the companies in the service side of the energy industry see an end, yet, to the downturn.
The analysts are in agreement. They cut 2016 and 2017 estimates after the earnings report.
2016 earnings are now expected to decline 60% in 2016 compared to 2015. 14 estimates were cut for 2016 in the last month, pushing the Zacks Consensus down to $0.63 from $1.08. Halliburton made $1.56 in 2015.
A rebound is expected in 2017, but those estimates were cut as well. The 2017 Zacks Consensus Estimate has fallen to $1.54 from $2.13 in the prior 30 days.
Shares Cut in Half
Since the summer of 2015, Halliburton shares have fallen by half. In just the last 3 months, they are down 22%.
But are they a deal?
Halliburton has a forward P/E of 46 which means it's still expensive, on an earnings basis.
Shareholders do get a dividend for their troubles, currently yielding 2.3%.
But it seems like it may still be too early to jump in on these shares.
For those interested in investing in the oil services industry, there aren't a lot of great choices. You might want to look at Tetra Tech (TTI). It's a Zacks Rank #3 (Hold) but it hasn't reported yet. Buyer beware.
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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.
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