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Halliburton Needs Drivers of Growth

Stocks in this article: HAL SLB BHI

NEW YORK ( TheStreet) -- Since reaching a high of $43.96 in February, shares of Halliburton (HAL) have been in a holding pattern -- zigzagging down and up, but not really going anywhere.

However, that's not to suggest that the stock has underperformed. In fact, it's done the opposite, as shares are up more than 20% on the year. Since shares reached a low of $29.83 in November, Halliburton has soared more than 40%. Investors want more. But given the uncertainty that still remains within the oil service industry, pinpointing the stock's next move is not easy.

What's more, even if the sluggishness in rig counts have bottomed, as industry experts believe, there's still the issue of Halliburton's valuation to deal with. The stock's not cheap. More specifically, how much more upside can there be given the enormous run that stock already has been on? To that end, the first-quarter results, although decent, didn't signal a strong buy.

The Quarter That Was

There wasn't much to be excited about in Halliburton's first-quarter results. That said, these performances, along with those from rivals like Schlumberger (SLB) and Baker Hughes (BHI), need to be kept in the context of the overall industry, which has been marred by slumping oil prices.

In that regard, management deserves some credit for what was actually pretty decent results relative to expectations. Revenue rose slightly to $6.97 billion. Bears will argue that this was less than 2% year-over-year growth, while falling 4% sequentially.

While this might be true, Halliburton still managed to beat Street estimates of $6.88 billion. The rest of the results, however, were mixed. Some arrived as surprises while others didn't. For instance, that Halliburton did so poorly in North America was a bit of a letdown. This is despite margins arriving very strong.

Granted, weakness in North America has been an issue for some time. But Halliburton showed some signs of improvement in the fourth quarter. So an 11% drop in revenue, which came in at $3.71 billion, was also a disappointment. It's hard to fall in love with the stock at these levels, especially given Halliburton's 43% drop in operating income.

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