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North American Strength Drives Halliburton (HAL) Q3 Earnings

Nilanjan Choudhury

Major oilfield services provider Halliburton Company HAL reported better-than-expected third quarter profit thanks to improved utilization and pricing gains in North America – the company’s largest market by sales.

Halliburton’s income from continuing operation came in at 42 cents per share, above the Zacks Consensus Estimate of 38 cents – the thirteenth consecutive quarterly outperformance. Moreover, revenues of $5,444 million beat the Zacks Consensus Estimate of $5,318.9 million.

Oil services companies (like Halliburton) – providers of technical products and services to drillers of oil and gas wells – are generally the first of the U.S. energy firms to kick off an earnings season. While two of the world’s biggest oilfield services providers – Schlumberger Ltd. SLB and Baker Hughes, a GE company BHGE – came out with September numbers on Friday, Oct 20, Weatherford International plc WFT, another biggie, will report third quarter earnings next week.

Halliburton Company Price, Consensus and EPS Surprise


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


North American Market Booming

Along the results, Halliburton also sounded optimistic in its view that the North American land market is improving rapidly, driven by increased utilization and pricing - particularly for pressure pimping. As it is, rig counts have generally been rising during the last one and half years since plunging to an all-time low of 404 in May 2016, with the addition of a flood of new units. As a proof of the recovery, Halliburton grew its domestic land revenue by 14% sequentially, well ahead of the U.S. land rig count growth of 6%.

Additionally, Halliburton’s international market proved resilient in the face of challenging circumstances. The company’s impressive expense management for the last several quarters helped regional sales rising more than 4% from the second quarter.

Segmental Performance

Operating income from the Completion and Production segment was $525 million, significantly higher than the year-ago level of $24 million. The division also improved from previous quarter’s income of $397 million, helped by better utilization and pricing in the North American land market - especially in Halliburton’s pressure pumping, completion tools and cementing product service lines.

Meanwhile, Drilling and Evaluationunit profit improved from $151 million in the third quarter of 2016 to $180 million this year. The number was also above the $125 million earned in the June quarter. The outperformance was on account of higher drilling activity in the Middle East, North America and Latin America. This was supported by an expanding Consulting and Project Management product line in the Eastern Hemisphere.  

Balance Sheet

Halliburton’s capital expenditure in the third quarter was $342 million.

As of Sep 30, 2017, the Zacks Rank #3 (Hold) company had approximately $1,898 million in cash/cash equivalents and $10,423 million in long-term debt, representing a debt-to-capitalization ratio of 53%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stock Performance

Halliburton has seen its shares fall 18.9% year to date after gaining more than 50% for 2016. Nevertheless, the company has managed to outperform the industry across the past six months- and 1-year periods.

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Weatherford International PLC (WFT) : Free Stock Analysis Report
Schlumberger N.V. (SLB) : Free Stock Analysis Report
Halliburton Company (HAL) : Free Stock Analysis Report
Baker Hughes Incorporated (BHGE) : Free Stock Analysis Report
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