Is Halliburton Still a Winner?

With shares of Halliburton Company (NYSE:HAL) trading at around $43.51, 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

This pretty much comes down to strong international performance and sub-par North American performance. Considering 53 percent of revenues are from North American operations, this is somewhat of a concern. However, there are many factors working in Halliburton’s favor as well.

Halliburton recently beat expectations. It has beaten expectations in four out of the last five quarters. Completion & Production revenues declined 4.4 percent year-over-year, but Drilling & Evaluation revenues increased 11.5 percent year-over-year. Margins have improved, and management expects them to continue to improve throughout the year.

Domestic demand might have slowed, but Halliburton has seen vigorous international drilling activity. The deepwater drilling revival in the Gulf of Mexico is also a big positive. Furthermore, Halliburton has strong relationships with key players in the industry throughout the world, and it has reached the expert level when it comes to finding ways to cut costs. Other positives include a positive outlook, consistent cash flow, quality debt management, diversification, and a recent dividend hike.

In regards to company culture, Halliburton comes in above average, which is a good sign. According to Glassdoor.com, employees have rated their employer a 3.3 of 5, which is above average. A decent 65 percent of employees would recommend the company to a friend, and 79 percent of employees approve of CEO Dave Lesar.

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The chart below compares fundamentals for Halliburton, Baker Hughes International (NYSE:BHI), and Schlumberger (NYSE:SLB).

HAL BHI SLB
Trailing P/E 20.20 16.83 18.46
Forward P/E 10.72 11.18 13.24
Profit Margin 6.96% 5.65% 12.70%
ROE 13.09% 7.13% 15.96%
Operating Cash Flow 3.27B 2.30B 7.07B
Dividend Yield 1.20% 1.30% 1.60%
Short Position 2.10% 2.10% 1.00%

Let’s take a look at some more important numbers prior to forming an opinion on this stock.

T = Technicals Are Strong

Halliburton has outperformed its peers for every time frame listed below. It’s also trading above its averages.

1 Month Year-To-Date 1 Year 3 Year
HAL 6.44% 25.75% 39.32% 59.78%
BHI -0.38% 12.56% 11.33% 4.28%
SLB -0.65% 8.89% 13.96% 21.25%
50-Day SMA 40.72
200-Day SMA 37.83

E = Equity to Debt Ratio Is Strong

The debt-to-equity ratio is stronger than the industry average of 0.40.

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Debt-To-Equity Cash Long-Term Debt
HAL 0.31 2.32B 4.82B
BHI 0.29 1.10B 5.09B
SLB 0.31 5.56B 11.10B

E = Earnings Are Steady

Earnings and revenue have consistently improved over the past several years. However, revenue and earnings haven’t been as consistent on a quarterly basis.

Fiscal Year 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 3.08 2.84
Quarter Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012 Mar. 31, 2013
Revenue ($) in billions 6.87 7.23 7.11 7.29 6.97
Diluted EPS ($) 0.68 0.79 0.65 0.7186 -0.02

Now let’s take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

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Conclusion

Halliburton has been a steady performer over the past three years. This trend is likely to continue as long as the broader market stays healthy. Then again, a market that only moves in one direction is an unhealthy market, but that’s a conversation for another time. As long as the trend is up, Halliburton should ride the wave. If there are any slowdowns, the 1.20 percent yield should help a little.

If growth is too slow for Halliburton, then an acquisition is a possibility. This would hurt the stock price in the short term, but it would increase long-term potential. Of course, there will be a delicate balance in regards to cost.

Halliburton is an OUTPERFORM. However, the stock will likely be sensitive to any market corrections.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

All content posted should not be considered professional advice. Please do your own research and consult with a professional financial advisor before making any investment decisions.

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