Is Halliburton Still a Winner?

With shares of Halliburton Company (NYSE:HAL) trading at around $44.89, 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 provides services and products for the exploration and development of oil and natural gas. What stands out most about Halliburton is that it has found a way to integrate drilling services while lowering costs. This is one of many reasons why analysts are heavily weighted to the Buy side for Halliburton. For example, of 34 analysts covering the stock, 27 have given it a Buy rating. The other seven analysts have given it a Hold rating. There are no analysts on the Sell side.

Halliburton operates in two segments: Completion & Production/Drilling & Evaluation. Halliburton is well known being an expert in hydraulic fracturing. This is a great reputation to have because it will lead to increased demand for Halliburton services.

For the current quarter, average analyst estimates are for EPS to come in at $0.58 on revenue of $6.89 billion. For 2013, average analyst estimates are for EPS to come in at $3.00 on revenue of $29.69 billion.

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Halliburton has strong fundamentals. It’s trading at only 14 times earnings, profit margin is solid, ROE is respectable, there is a 1.30 percent yield, cash flow is strong, and revenue growth has been high. Much of this can be seen on the chart below. This chart compares fundamentals for Halliburton, Schlumberger Limited (NYSE:SLB), and Baker Hughes Incorporated (NYSE:BHI). These three companies differ in size. Halliburton has a market cap of $36.95 billion, Schlumberger has a market cap of $98.10 billion, and Baker Hughes has a market cap of $19.83 billion.

HAL

SLB

BHI

Trailing   P/E

13.95

18.02

15.11

Profit   Margin

9.24%

13.03%

6.14%

ROE

17.84%

16.51%

7.93%

Dividend   Yield

1.30%

1.70%

1.30%

Operating   Cash Flow

$3.65 Billion

$6.69 Billion

$1.84 Billion

Short   Position

2.20%

1.00%

2.90%

Beta

1.82

1.81

1.82

 

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

E = Equity to Debt Ratio Is Strong   

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

Debt-To-Equity

Cash

Long-Term Debt

HAL

0.31

$2.75 Billion

$4.82 Billion

SLB

0.33

$6.28 Billion

$11.63 Billion

BHI

0.28

$1.02 Billion

$4.92 Billion

 

T = Technicals on the Stock Chart Are Strong  

Halliburton has outperformed Schlumberger and Baker Hughes for every time frame listed below.

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1 Month

Year-To-Date

1 Year

3 Year

HAL

-0.17%

14.68%

20.05%

38.41%

SLB

-2.58%

7.01%

2.91%

27.23%

BHI

1.49%

10.31%

4.14%

3.66%

 

At $44.89, Halliburton is trading above all its averages.

50-Day   SMA

40.17

100-Day   SMA

36.70

200-Day   SMA

34.55

 

E = Earnings Have Suffered a Setback        

Revenue has consistently improved on an annual basis, but earnings suffered a setback in 2012.

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

 

When we look at the last quarter on a year-over-year basis, we see an increase in revenue and a decline in revenue.

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

0.72

 

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?

T = Trends Should Support the Industry

There had been a slowdown in oil and natural gas services companies, but these companies still managed to hold their own through difficult times. Looking ahead, with natural gas prices beginning to increase, the industry will improve. One small note here is that Schlumberger has trimmed its guidance, but Schlumberger has a lot more global exposure whereas as Halliburton has more domestic exposure. Therefore, this isn’t necessarily a warning sign for Halliburton.

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Conclusion

Halliburton has strong fundamentals, superb innovation, and a 1.30 percent yield. Halliburton is an OUTPERFORM.

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