This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Halliburton's Pump Is Primed for $65

NEW YORK (TheStreet) -- There has never been any doubt that Halliburton (HAL - Get Report), the world's No. 2 oilfield services company behind Schlumberger (SLB - Get Report), has had strong operational performances. The question, though, has been whether Street expectations -- especially amid perpetual weak demand in North America -- have been too high. Given that the region accounts for roughly 50% of Halliburton's revenue, heightened pressure is on management to grow its international business.

All told, while management has done an excellent job navigating the brutal oil services industry, which has been marred by weak prices and soft rig counts, growth has nonetheless been hard to come by. However, that didn't stop me from assigning a $50 target on the stock back in August when shares traded around $46 a share. This is even though the company was coming off a quarter during which revenue grew just 1% year-over-year, the worst of the Big Three, including Baker Hughes (BHI).

Even so, what I noticed then was that unlike both rivals, Halliburton showed plenty of strength in international markets, which grew 14% year over year and 8% sequentially in the July quarter. Fast-forward four months later, the Street has finally caught on as shares of Halliburton are now trading at around $55 per share, or roughly 20% higher than my initial target. And following the company's solid third-quarter earnings report, I don't see anything standing in the way of $65 per share. Plus, this time it is the company, not the Street, that is raising expectations.

I've heard some analysts describe Halliburton's third-quarter results as "so-so" on the basis of a $60 million shortfall in revenue. But with results already in hand from Schlumberger and Baker Hughes, I was quite impressed with Halliburton's performance, both on a relative and absolute basis. First, although revenue did miss Street estimates, the 5% year-over-year should be taken in the context of the meager 1% growth in the July quarter.

Again, this is another example of how the Street's expectations have consistently been -- in my mind -- entirely irrational. It should have come as no surprise that the revenue miss, which was due to ongoing weakness in North America, was again the focal point. This has been the case for the past couple of quarters. Although the 1.6% growth was a disappointment, management made up for this with an 18% increase in operating income.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
HAL $31.35 0.00%
SLB $68.81 0.00%
AAPL $94.02 0.00%
FB $104.07 0.00%
GOOG $683.57 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs