Will Halliburton’s Stock Continue to Climb?

With shares of Halliburton (NYSE:HAL) trading at around $39.72, is HAL an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Halliburton recently beat estimates, but it’s the future that makes the stock appealing. For Q4, Halliburton had record revenue of $7.3 billion. EPS was down 26 percent year-over-year, but it still beat estimates, coming in at $0.63 per diluted share. FY2012 revenue was also a record at $28.5 billion.

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In regards to 2013, margins are expected to improve, dividend increases and buybacks are highly likely, capital expenditures are expected to decrease, investments in deepwater technology will continue to pay off, and there will be strong growth overseas. Halliburton is also focused on international development in Russia, Australia, and China. The company is making a special and concerted effort to gain market share from competitors in Russia.

Let’s take a look at some important numbers for Halliburton so we can get a better idea of the big picture…

E = Equity to Debt Ratio Is Strong

The debt-to-equity ratio Halliburton is strong, which is normal for the industry.  

Debt-To-Equity

Cash

Long-Term Debt

HAL

0.31

$2.48 Billion

$4.82 Billion

BHI

0.28

$1.02 Billion

$4.92 Billion

SLB

0.33

$6.27 Billion

$11.63 Billion

 

T = Technicals on the Stock Chart Are Strong

Halliburton has outperformed Baker Hughes Incorporated (NYSE:BHI) and Schlumberger Limited (NYSE:SLB) over the past three years. However, Halliburton only yields 1 percent whereas Baker Hughes yields 1.30 percent and Schlumberger yields 1.60 percent.

1 Month

Year-To-Date

1 Year

3 Year

HAL

14.43%

14.50%

11.06%

32.73%

BHI

13.63%

11.66%

-3.92%

0.73%

SLB

15.07%

14.74%

6.25%

26.00%

 

At $39.72, Halliburton is currently trading above all its averages.         

50-Day SMA

34.38

100-Day SMA

34.13

200-Day SMA

32.82

 

E = Earnings Have Been Steady

Earnings have been steady on annual basis, but there hasn’t been uninterrupted and consistent growth. On the other hand, revenue has increase on annual basis since 2009.

2008

2009

2010

2011

2012

Revenue ($)in billions

18.28

14.68

17.97

24.83

28.50

Diluted EPS ($)

2.45

1.27

2.01

3.26

2.78

 

We already know what happened this quarter. Now let’s take a look at what happened in previous quarters as well.

12/2011

3/2012

6/2012

9/2012

12/2012

Revenue ($)in billions

7.06

6.87

7.23

7.11

7.29

Diluted EPS ($)

0.98

0.68

0.79

0.65

0.63

 

T = Trends Support the Industry

North America has been slow, but there has been strong growth in the Middle East, Asia, and Lain America. This growth has been strong enough to offset weakness in North America. This trend is also likely to continue. If natural gas prices make any sort of a comeback, then the situation in North America could also improve, but there is no known catalyst that could have that effect in the near-term.

Conclusion

Halliburton has had its ups and downs through the years, but over the long haul, the direction has been mostly up. This is a large and powerful company with good margins that are likely to improve, excellent cash flow, a reasonable balance sheet, and an attractive valuation with a Forward P/E of 10.13. With the future likely to include dividend increases, buybacks, a decrease in capital expenditures, strong growth overseas, and enormous potential in deepwater drilling, Halliburton is an OUTPERFORM.

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