Halliburton stock (NYSE: HAL), an energy company organized into the exploration, development, and production of oil and natural gas, is scheduled to report its fiscal fourth-quarter results on Tuesday, January 23. We expect HAL’s stock to likely trade higher with revenues and earnings beating market expectations in its fourth quarter. In Q3 2023, HAL’s North American revenue fell 1% year-over-year (y-o-y) to $2.6 billion, driven primarily by decreased pressure pumping services in U.S. land and lower well intervention services in the Gulf of Mexico. This segment accounts for almost 45% of the company’s total revenues.
It will be intriguing to witness how this division’s revenue performs in the upcoming fourth quarter results. The North American land market could encounter an activity plateau in the near term due to lower-than-expected natural gas prices and capital restraint by private exploration & production operators. On the contrary, the company’s international and offshore markets continue to undergo a robust resurgence of activity driven by resilient long-cycle development and capacity expansion projects. Supply cuts from Saudi Arabia and Russia have facilitated a more supportive environment for current oil prices. However, any signs of a potential economic slowdown in the U.S. could raise questions about demand in the short run.

According to the International Energy Agency, global liquid fuel production is expected to increase by 0.6 million barrels/day in 2024, primarily because of growth from non-OPEC producers such as the United States, Norway, Canada, Brazil, and Guyana. These market dynamics are likely to drive new drilling activity, thereby enabling HAL to exert its pricing power as both land drilling and offshore activity increase in the long run.

Uneven Stock Growth

HAL stock has witnessed substantial gains of 75% from levels of $20 in early January 2021 to its current levels, while the S&P 500 increased by about 30% over the same period. However, the growth in HAL stock has not been consistent. Stock returns for HAL were 21% in 2021, 72% in 2022, and -8% in 2023. In comparison, S&P 500 returns were 27% in 2021, -19% in 2022, and 24% in 2023, signifying that HAL underperformed the S&P in 2021 and 2023. Beating the S&P 500 consistently – in good times and bad – has been challenging for individual stocks in recent years, even for heavyweights in the Energy sector and megacap stars. In contrast, the Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over the same period. This raises the question – Why is that? HQ Portfolio stocks have proven to provide better returns with less risk compared to the benchmark index, evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could HAL face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it witness a strong surge?

Our forecast indicates that HAL’s valuation is $43 per share, 27% higher than the current market price. For more details, you may refer to our interactive dashboard analysis on HAL Earnings Preview: What To Expect in Fiscal Q4?.

Anticipated Q4 Results

(1) Revenues expected to exceed consensus estimates
Trefis estimates HAL’s Q4 2023 revenues to be around $5.9 billion, slightly ahead of the consensus estimate. Halliburton saw its revenues jump 8% year-over-year (y-o-y) to $5.8 billion in Q3. The company’s Q3 International revenue increased 17% y-o-y to $3.2 billion. By segment, Completion and Production revenue rose 11% y-o-y to $3.5 billion, driven by increased completion tool sales globally and higher artificial lift activity in North America, while Drilling and Evaluation revenue gained 4% to $2.3 billion, primarily due to an increase in fluid services globally, and higher drilling activity in the Western Hemisphere and Saudi Arabia. For FY 2023, we forecast HAL’s Revenues to be $23.5 billion, up 16% y-o-y.

(2) EPS is also likely to surpass consensus estimates
HAL’s Q4 2023 earnings per share (EPS) is expected to come in at 82 cents per Trefis analysis, marginally beating the consensus estimate. The company’s Q3 net income increased to $716 million, or $0.79 per share, from $544 million, or $0.60 per share, in the year-earlier quarter.

(3) Stock price estimate higher than the current market price
Going by our HAL’s Valuation, with an EPS estimate of around $3.08 and a P/E multiple of 13.8x in fiscal 2023, this translates into a price of $43, which is almost 27% higher than the current market price.

Comparative Performance

It is helpful to assess how HAL’s peers stack up. HAL Peers offers a comparison of Halliburton’s stock against peers on critical metrics. You can find other relevant comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 1/22/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.