TSC Ratings' Updates: Halliburton

We've downgraded Halliburton(HAL Quote), which provides services and products to energy, industrial and government customers, from buy to hold. Strengths include EPS growth, robust revenue growth and a largely solid financial position with reasonable debt levels by most measures. Weaknesses include deteriorating net income, poor profit margins and a generally disappointing performance in the stock itself.

Revenues rose by 20.1% since the same quarter last year, boosting EPS but underperforming the industry average of 29.6%. The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Halliburton has a quick ratio of 2.10, which demonstrates the ability of the company to cover short-term liquidity needs. Net operating cash flow has slightly increased to $460 million, or 4.30% when compared with the same quarter last year. However, its cash flow growth rate is still lower than the industry average of 18.8%.

Net income has decreased by 66.9% when compared with the same quarter a year ago, from $1,530 million to $507 million. This significantly underperforms the S&P 500 and the energy equipment and services industry. The company's gross profit margin of 26.1% is lower than desirable, having decreased from the same quarter last year. Also, the net profit margin of 11.30% significantly trails the industry average.