Is Halliburton a smart stock of oil and gas equipment and services to invest in?

Halliburton Company (HAL) is one of the world’s largest suppliers of products and services to the energy industry, present in more than 70 countries. The Company operates in two segments – Completion and Production; and drilling and appraisal.

On May 23, 2022, HAL announced its agreement with Aker BP, a Norwegian oil and gas exploration and production company, to co-develop the development of next-generation fields planning software. The new cloud-based application, Field Development Planning (FDP), aims to strengthen advanced risk management for development-related activities in the field.

Additionally, on April 19, 2022, Jeff Miller, Chairman, President and Chief Executive Officer, said, “I am excited about the accelerating pace of global activity, improving pricing and the strong outlook of Halliburton. With our unique value proposition, clearly defined strategic priorities, advanced technology portfolio and global market presence, I expect Halliburton to deliver profitable growth, strong free cash flow and returns at the forefront of the industry.

Over the past year, HAL has gained 55.4% and 60.3% year-to-date to close yesterday’s trading session at $36.67. Additionally, the stock has gained 82.7% over the past nine months and slightly over the past month.

Here’s what could shape HAL’s performance in the short term:

Mixed finance

For the first quarter ended March 31, 2022, HAL’s total revenue was $4.28 billion, up 24.1% year-over-year. Its net income was $263 million, up 54.7% year-on-year, while its EPS was $0.29, up 52.6% from one year to the next. However, the company’s cash and cash equivalents were $2.15 billion, down 11.9% year-over-year.

Favorable analyst expectations

Analysts expect HAL’s revenue to grow 25% in the current year and 15.5% next year. In addition, its EPS is expected to increase 75% in the current year and 40.7% next year. Additionally, HAL’s EPS is expected to grow 60.8% annually over the next five years. It has exceeded EPS estimates in each of the past four quarters.

Of the fourteen Wall Street analysts who rated HAL, twelve rated it Buy and two rated it Hold. Additionally, Wall Street analysts expect the stock to hit $46.83 shortly, indicating a 27.7% upside potential.

Stretched ratings

In terms of before EV/S, HAL is currently trading at 2.16x, 8.1% higher than the industry average of 2.00x. The stock’s advanced P/S multiple of 1.73x is 9.8% higher than the industry average of 1.57x. In terms of forward EV/EBITDA, HAL’s 11.21x is significantly above the industry average of 6.62x.

Mixed profit margins

HAL’s trailing twelve-month net profit margin of 9.61% is 97.7% above the industry average of 4.86%, while its trailing twelve-month EBIT margin of 11.81% is above from 8.7% to the industry average of 10.86%. However, its trailing 12-month gross profit margin of 13.54% is 66.3% below the industry average of 40.13%, and its trailing 12-month EBITDA margin of 17.45% is 20.8% lower than the industry average of 22.03%.

POWR ratings reflect uncertainty

HAL has an overall rating of C, which equates to Neutral in our own POWR Rankings system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

HAL has a quality rating of C, consistent with its mixed profit margins.

The title has a C rating for stability, in sync with its 24-month beta of 0.98.

In stock 47 Energy – Services industry, HAL is ranked #23. The sector is classified C.

Click on here to see additional POWR ratings for HAL (Growth, Value, Momentum, Sentiment).

See all the main shares of the Energy – Services sector here.

Conclusion

Energy services company HAL should benefit from high oil and gas prices. However, HAL’s stretched valuations and declining cash balance are cause for concern. Additionally, its revenue and EPS have declined at CAGRs of 12.4% and 5% over the past three years, respectively. Therefore, I think it would be wise to wait for a better entry point in the stock.

How does Halliburton Company (HAL) compare to its peers?

Although HAL has an overall POWR rating of C, one might consider looking at its industry peers, ChampionX Corporation (CHX), NOW Inc. (DNOW), and Solaris Oilfield Infrastructure, Inc. (SO I), which have an overall rating of B (buy).


HAL shares were trading at $36.26 per share on Wednesday afternoon, down $0.41 (-1.12%). Year-to-date, HAL has gained 59.58%, compared to a -19.49% rise in the benchmark S&P 500 over the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions through her insightful commentary. After…

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