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TheStreet Open House

Halliburton Poised to Break Its 52-Week High

NEW YORK (TheStreet) -- When Halliburton (HAL - Get Report) reported its quarterly results on April 21, it failed to post any increase in profits. Yet its shares are up 5.8% since the earnings release as of 3:15 p.m. Wednesday -- close to 52-week highs.

That is because the company, which has struggled due to the weakness in the North American oil pressure pumping prices, has projected 25% growth in earnings in the next quarter, driven by an expected uptake in activity.

Moreover, analysts have forecast an increase in exploration and production expenditure and rig count, both in and outside of North America, for the next couple of years. This will fuel Halliburton's revenue and income growth in the coming quarters.

Halliburton's shares are up nearly 27% for the year to date, currently around $64.50, easily outperforming the S&P 500 (SPY), which is up 2.7% in the same period.

Despite the rally, the company's shares are trading just 20.8 times its trailing earnings and 1.8 times its trailing sales, significantly cheaper than most of its peers. The industry average share price is 2.48 times trailing sales and 44 times trailing earnings, according to Thomson Reuters.

In the first quarter of the current fiscal year, Halliburton swung to a net income from continuing operations of $623 million after a loss of $13 million in the same quarter last year. However, excluding the $637 million in charges related to the Macondo litigation recorded in the prior year, the company's earnings were flat. Its revenue, on the other hand, climbed 5.4% to first-quarter record levels of $7.35 billion.

Halliburton's revenue from North America increased by 5.3% year-over-year to $3.90 billion, but operating income dropped by 0.5% to $602 million. Unlike Schlumberger (SLB), and much like Baker Hughes (BHI), Halliburton gets more than 50% of its revenues and more than 60% of its operating income from North America.

The severe winter weather conditions as well as an increase in freight and fuel costs and lower pressure pumping prices had an adverse impact on Halliburton's operations in North America.

On the other hand, Halliburton's robust growth in the international markets is making up for the sluggishness at home. Halliburton has reported a 13.5% growth in revenues and 12.8% growth in operating income from the Middle East and Asia, driven by an increase in rig count in Saudi Arabia.

The company's Middle East and Asia region has now become nearly as large as its second-biggest market, which covers Europe, Africa and the Commonwealth of Independent States region of former Soviet nations. The company reported a 9% and 21% increase in revenues and operating income from Europe, Africa and CIS.

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