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Buy This Cheap Oil Stock at a Discount?

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Halliburton HAL stock tumbled from its early June highs to trade under $30 per share heading into its second quarter earnings release on July 19. The oil field services giant’s outlook remains strong despite a pullback in oil prices, and some of Halliburton’s other fundamentals might attract investors.

HAL’s Quick Story

Halliburton provides products and services to the oil and energy industry. Halliburton operates around much of the globe and its offerings help companies operate and run the entire lifecycle of a project. HAL’s products and services span from subsurface work such as formation evaluation and well construction to production and abandonment.

Oil prices have surged off their covid lows and demand will remain high for decades to come even as countries and companies invest in electric vehicles and renewable energy. Even though oil prices have pulled back from their highs, they remain near $100 a barrel. The current global environment will likely see more firms slowly expand their drilling efforts. And surveys show companies can drill profitability even if prices fall to around $60 a barrel. All of this should continue to benefit Halliburton.

Halliburton’s 2021 adjusted earnings surged 66% on 6% higher revenue, with the growth coming up against an easy-to-compete against 2020. HAL’s FY22 and FY23 earnings outlook has climbed since its Q1 release to help it land a Zacks Rank #2 (Buy).

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Zacks estimates call for its revenue to climb 26% in FY22 and another 16% in 2023 to reach $22 billion. Halliburton’s adjusted earnings are set to soar 78% this year and 43% in 2023 to come in at $2.74 per share.

Bottom Line

Halliburton’s Oil and Gas-Field Services industry is in the top 22% of over 250 Zacks industries and HAL lands an “A” VGM grade. HAL raised its FY22 quarterly dividend by 167%, with room to lift it again going forward. Plus, 80% of the brokerage recommendations Zacks has for Halliburton are “Strong Buys” or “Buys.”

HAL shares jumped 140% in the past two years to blow away the Oil-Energy sector’s 60% and its industry’s 37%. The stock has dropped 30% from its early June highs to $28 a share, offering 36% upside to its current Zacks consensus price target.

On the valuation front, Halliburton trades at a 25% discount to its industry’s current average and its own decade-long median at 12.5X forward earnings. All in, investors might want to consider this cheap oil industry stock as a play for the second half of 2022 and beyond.


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