Halliburton's Making Its Way to $50

NEW YORK ( TheStreet) -- When compared to rivals Baker Hughes ( BHI) and Schlumberger ( SLB), I've never believed that shares of Halliburton ( HAL) presented any immediate value -- not when the stock traded at a price-to-earnings ratio that is 5 points higher than Schlumberger, which is considered the best of bunch.

Even so, that's never stopped me from making comparisons as to whether or not Halliburton could one day supplant Schlumberger as the market's leader.

Though Schlumberger has always enjoyed more press coverage, Halliburton has never been too far behind. Following the company's recent, better-than-expected earnings report, I believe Halliburton is now in one of the best positions it has ever been, given how well management is performing internationally. Now that there are clear signs that sluggish rig counts have finally bottomed, shares of Halliburton, which have already gained 32% on the year, may yet be cheap.

Investors in this sector understand how brutal the industry has been. So it came as no surprise that Halliburton managed 1% year-over-year revenue growth in the quarter. But unlike most sectors, the year-over-year comparisons very rarely ever matter. Always looking for signs of improvement, analysts make their assessments by focusing more on the quarter-over-quarter basis. To that end, Halliburton was more "energized" as revenue grew by more than 5% since the April quarter.

As with Schlumberger and Baker Hughes, weakness in North America has been tough to overcome. But Halliburton managed to grow revenue 3% sequentially, which was consistent with the performances of both Schlumberger and Baker Hughes. But unlike both rivals, Halliburton showed plenty of strength in international markets, growing 14% year over year and 8% sequentially.

I don't want to exaggerate Halliburton's international performance. Schlumberger, which posted 10% year-over-year growth in international markets, was no slouch either. But in Halliburton's case, the company is only a couple of quarters removed from posting a 5% year-over-year decline in its international business.

What this means is that management's new focus on international markets is working well -- remarkably, much quicker than even the company expected. In that regard I don't think it's wrong to speculate that Halliburton is, in fact, gaining share on Schlumberger internationally. Plus, given that Halliburton has more exposure in North America than both Baker Hughes and Schlumberger, Halliburton has now developed a solid international revenue base to help offset North American weakness.

I'm not suggesting that the worst is over, only that any prolonged weakness in North America is not as dire. In that regard, management deserves a considerable amount of credit for having navigated such a brutal environment, especially for the 15% sequential growth in operating income, which outperformed Schlumberger by 2%.

It wasn't a blowout quarter, not by any stretch. But the company did what it had to do to beat both on revenue and earnings estimates. There's not much more that an investor can ask for, especially given the overall state of this industry. Investors should also be encouraged by the fact that the company announced a $5 billion share buyback program, which indicated an increase level of confidence by management that the worst is over.

I wouldn't expect that capital commitments of that size would have been made if management was worried about preserving the cash to battle the weakness in, say, North America. What's more, the $5 billion stock repurchase program, which now goes along with the company's 39% dividend increase (announced in April), makes Halliburton one of the best shareholder-friendly stocks on the market. It is clear that management is committed to returning value to investors.

That level of commitment is tough to overlook, especially with management now posting better operational results, which also coincides with sustained growth in international markets.

The bottom line is that regardless of the industry's direction, Halliburton is going to be around for a very long time. Given the fact that the oil services industry has yet to fully rebound, I believe now is the perfect time to buy the stock, which is a sure bet to reach $50 per share.

At the time of publication, the author held no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Richard Saintvilus is a co-founder of StockSaints.com where he serves as CEO and editor-in-chief. After 20 years in the IT industry, including 5 years as a high school computer teacher, Saintvilus decided his second act would be as a stock analyst - bringing logic from an investor's point of view. His goal is to remove the complicated aspect of investing and present it to readers in a way that makes sense.

His background in engineering has provided him with strong analytical skills. That, along with 15 years of trading and investing, has given him the tools needed to assess equities and appraise value. Richard is a Warren Buffett disciple who bases investment decisions on the quality of a company's management, growth aspects, return on equity, and price-to-earnings ratio.

His work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets.

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