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Halliburton (HAL) Q1 Earnings Meet Estimates, Revenues Beat

Nilanjan Choudhury

Oil service bellwether Halliburton Company HAL reported in-line first quarter profit on robust international activity, offsetting pricing pressure in the North American business. 

The world's second-largest oilfield services company after Schlumberger SLB saw its adjusted net income (excluding impairments and other charges) come in at 23 cents per share, same as the Zacks Consensus Estimate.

However, the bottom line was below the adjusted earnings of 41 cents in the year-earlier quarter. Adjusted net income reported by Halliburton was $201 million, well below the $358 million for the same period last year.

Meanwhile, revenues of $5.7 billion were approximately flat with the year-ago quarter and scraped past the Zacks Consensus Estimate by 3.5%. North American revenues were down 6.9% year over year to $3.3 billion. Revenues from Halliburton’s international operations rose 11% from the year-ago period to $2.5 billion.

Halliburton Company Price, Consensus and EPS Surprise

 

Halliburton Company Price, Consensus and EPS Surprise | Halliburton Company Quote

Management’s Outlook

The world’s biggest provider of hydraulic fracking noted that North American activity levels in the first quarter improved slightly year over year but encountered pricing pressure throughout the period. Importantly, Halliburton suggested that the worst is over for the domestic market, as far as pricing weakness is concerned.  

Meanwhile, Halliburton is witnessing broad-based, steady recovery in its international business. The company anticipates its international revenue to grow at a high single-digit rate in 2019, with further improvement next year.

In response to the changing market dynamics, the company is looking to continue its disciplined approach to capital spending, improve efficiency, develop sophisticated technologies and generate strong cash flow from operations.

Segmental Performance

Operating income from the Completion and Production segment was $368 million, 26.4% below the year-ago level of $500 million. The division’s performance was affected by pricing declines in U.S. land stimulation services.

However, the segment operating income bettered our consensus estimate of $335 million. The outperformance was largely the result of strong domestic artificial lift and cementing activity, increased stimulation activity in Latin America, and higher completion tool sales in Middle East/Asia and Latin America.

Meanwhile, Drilling and Evaluationunit profit fell from $188 million in the first quarter of 2018 to $123 million in the corresponding period of 2019. The segment income was also below the Zacks Consensus Estimate of $146 million. The underperformance was on account of costs associated with the mobilization of a number of overseas drilling projects, lower project management activity and weak pricing in the Middle East.

Balance Sheet

Halliburton’s capital expenditure in the first quarter was $437 million. As of Mar 31, 2019, the Zacks Rank #3 (Hold) company had approximately $1.4 billion in cash/cash equivalents and $10.3 billion in long-term debt, representing a debt-to-capitalization ratio of 51.7%.

(You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.)

Earnings Schedules of Other Oilfield Service Peers

Among the major players, Schlumberger kicked off the earnings season last Thursday, while Baker Hughes, a GE company BHGE will report on Apr 30. Weatherford International plc WFT will report first-quarter earnings early next month.

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