Halliburton Earnings Go From Good to Great on Outlook

Thinkstock.com

Thinkstock.com

Shares of Halliburton (NYSE:HAL) climbed as much as 3.45 percent in early trading on Monday after the oilfield services company reported strong first-quarter earnings. Revenue of $7.35 billion, down 3.9 percent sequentially but up 4.3 percent on the year, was higher than the mean analyst estimate of $7.24 billion. Net income of $622 million (73 cents per share), down about 21 percent sequentially but up from a loss of $16 million (2 cents per share) in the year-ago period, also beat the mean analyst estimate of 71 cents per share.

“I am pleased with total company revenue of $7.3 billion, which was a record first quarter for Halliburton,” said Halliburton Chairman and CEO Dave Lesar in the earnings report. “Operating income of $970 million was 8% higher than adjusted operating income in the first quarter of 2013, and was the result of our double-digit growth in the Eastern Hemisphere.” In that region, operating income grew 16 percent on the year, complemented by 11 percent revenue growth.

By region, North America accounts for the lion’s share of Halliburton’s revenue, with a 53 percent share, or $3.9 billion in the first quarter, up about 5.4 percent on the year. Europe/Africa/CIS and the Middle East/Asia each account for about 17.7 percent of total revenue, with about $1.3 billion reported in the first quarter, and each up 13 percent on the year.

Halliburton — alongside other oilfield services companies like Schlumberger (NYSE:SLB) and Baker Hughes (NYSE:BHI) — was recently highlighted by Sterne Agee analyst Stephan Gengaro as a candidate for strong growth in the second quarter. Gengaro anticipates that energy companies will cash in on demand pent up during the particularly severe winter this year, providing tailwinds for Halliburton and crew.

Lesar forecast full-year growth “in the low double digits” with average margins “in the upper teens.” This bullishness builds on an already successful year to date on the stock chart for the industry. The Market Vectors Oil Services ETF(NYSE:OIH), which holds shares in Halliburton, Schlumberger, and Baker Hughes, is up nearly 8 percent this year and more than 25 percent year over year.

“Our strategy is working well and we intend to stay the course. I am optimistic about our ability to grow our North America revenue and margins, and to realize industry-leading revenue and margin growth in our international business, resulting in solid EPS growth and significantly higher cash generation,” Lesar commented in Halliburton’s earnings release. “We expect earnings per share to grow approximately 25% in the second quarter, with further increases to follow. We remain focused on generating superior financial performance and providing industry-leading shareholder returns, as evidenced by our $500 million share repurchase this quarter.”

Halliburton’s optimistic outlook spilled over into Schlumberger stock on Monday, as shares rose more than a percentage point in early trading. The company won’t report earnings until July, but analysts are looking for both top- and bottom-line growth.

More From Wall St. Cheat Sheet: