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Halliburton (HAL) Up 16.4% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Halliburton (HAL). Shares have added about 16.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Halliburton due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Halliburton Q1 Earnings Top Estimates

Halliburton Company delivered better-than-expected first-quarter 2021 earnings as the Drilling and Evaluation segment outperformed the Zacks Consensus Estimate.

The oilfield services company reported earnings of 19 cents per share, beating the Zacks Consensus Estimate of 17 cents.

However, the bottom line tumbled 38.7% from the year-ago figure of 31 cents per share due to lower revenue contribution from North America activities.

Operating income in the quarter under review was $370 million. However, the year-ago quarter reported an operating loss of $571 million.

Revenues of $3.5 billion slumped 31.5% from the year-ago quarter’s sales. Additionally, North America revenues plunged 42.9% year over year to $1.4 billion. Meanwhile, the top line matched the Zacks Consensus Estimate.

Outlook

The world’s biggest provider of hydraulic fracking noted that the North American activity levels are finally gathering momentum. The company’s disciplined execution, cost-cutting measures, its emphasis on technological advancements and digital investments along with improvements in service offerings should lead to strong margins, internationally, as well as value optimization in North America. With the most encouraging macro backdrop in months and the sector’s recovery from the coronavirus-induced depths, Halliburton is targeting industry-leading returns and a strong free cash flow.

Segmental Performance

Operating income from the Completion and Production segment came in at $252 million, significantly dropping 27% from the year-ago level of $345 million and also missing the Zacks Consensus Estimate of $265 million.

The division’s performance was affected by weakness in completion tool sales along with decreased pressure pumping operation in the Eastern Hemisphere as well as lower cementing activity in Russia.

Drilling and Evaluation unit profit declined from $217 million in the first quarter of 2020 to $171 million in the corresponding period of 2021, thanks to ramped-down drilling-related operations in Asia. However, the segmental income outperformed the Zacks Consensus Estimate of $129 million, attributable to an improved project management activity internationally, strengthened drilling-related facilities and wireline activity in the Western Hemisphere and Norway as well as increased software sales worldwide.

Balance Sheet

Halliburton’s capital expenditure in the first quarter was $104 million. As of Mar 31, 2021, the company had $2.45 billion in cash/cash equivalents and $9.13 billion in long-term debt, representing a total debt-to-total capitalization of 63.8%.




 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Halliburton has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

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


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