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Will Halliburton (HAL) Q2 Earnings Surprise This Season?

Zacks Equity Research

Halliburton Company (HAL) is set to report second-quarter 2014 results on Jul 21, before the market opens.

Last quarter, Halliburton posted a positive earnings surprise of 2.82% — the fourth consecutive quarterly beat for the company. Improved stimulation work in the U.S. and increased profits from its pressure pumping business in Argentina aided the growth. Augmented drilling operations in the Eastern Hemisphere also drove the results. Let’s see how things are shaping up for this announcement.

Factors to Consider this Quarter

Halliburton, the world’s second-largest oilfield services provider after Schlumberger Limited (SLB), had an outstanding run on the earnings front in the past few quarters, thanks to its strong competitive position, robust contracts and new technologies.

Being in the oilfield services industry, the company’s profits are largely related to higher demand from oil and gas explorers and drillers, which in turn depend on the price of commodities. While natural gas prices have remained flattish in the last quarter, oil prices have rallied, creating an opportunity whereby Halliburton can expect to receive million-dollar contracts from energy companies.

Moreover, higher activity in the international market and a recovering North American pressure pumping scenario should help the company’s cash flows. Halliburton could also gain from deepwater growth as these contacts are generally for long periods and are rewarding. Additionally, as these are capital intensive and require substantial technical expertise, deepwater contracts elude several small players and are awarded to biggies like Halliburton.

In the first quarter, the severe weather had affected the company’s North American operations, the absence of which could lead to improved margins. During its first-quarter conference call, Halliburton also anticipated an improvement in revenues and margins in the eastern hemisphere operations.

Earnings Whispers?

Our proven model does not conclusively show that Halliburton is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.  

Zacks ESP:  The Earnings ESP is 0.00%.

Zacks Rank: Halliburton carries a Zacks Rank #2 (Buy), which when combined with a 0.00% ESP, makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies for investors to consider, that, according to our model have the right combination of elements to post an earnings beat this quarter:  

Swift Energy Co. (SFY) has Earnings ESP of +150.00% and a Zacks Rank #1 (Strong Buy).

RPC Inc. (RES) has Earnings ESP of +7.69% and a Zacks Rank #2 (Buy).

Read the Full Research Report on SLB
Read the Full Research Report on HAL
Read the Full Research Report on RES
Read the Full Research Report on SFY

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