Dial Back Expectations for Halliburton

NEW YORK ( TheStreet) -- As long as Schlumberger ( SLB) is still around, I don't believe Halliburton ( HAL) will ever get the respect it truly deserves. Given that the stock is trading at its 52-week high and has posted gains of close to 50% year-to-date, I do realize it's a bit odd to complain about the Street's lack of admiration for the company.

Expectations for this company have always been too high. And while management has done an excellent job navigating the cut-throat oil services industry, the company has been unable to manufacture growth out of thin air. Weak North American demand (roughly 50% of Halliburton's revenue) has been tough to overcome, leading to a meager 1% year-over-year revenue growth in the July quarter.

Today, with shares of Halliburton trading over $50 ( exceeding my price target), I believe the stock has reached its fair value territory. I say this even with the belief that prior concerns about sluggish rig counts and slumping prices are issues of the past.

Given that the Street has recently jumped on the "Halliburton growth in 2014" campaign, it seems I'm not the only one who sees a brighter future. Brad Handler of Jefferies has cited improved upstream spending in the U.S., which he expects to grow in 2014. Along with his recent $58 price target, Handler also raised his earnings estimates for 2014 by 6%.

Not to be outdone, Raymond James recently upgraded the stock to $63, an astounding 23% premium from current levels. While citing the production potential of the Bakken formation, Goldman Sachs ( GS) suggested that Halliburton will "likely exceed Street expectations."

The Bakken formation is described as a low-permeability formation contains the largest oil accumulation in the contiguous U.S. This means Halliburton should benefit from more drilling and increased demand for its equipment and services. The company is now in one of the best positions it has ever been in.

Still, let's not discount that rig productivity is still under pressure in North America and completion and production revenues declined more than 3% in the July quarter. Before jumping into 2014 projections, we should evaluate the company's performance on a quarter-by-quarter basis.

While I do believe that the worst is over, we will get a better view of the company's overall direction when Halliburton reports its third-quarter earnings results Monday. We will also get confirmation as to whether these recent price targets are justified. The Street will be looking for earnings-per-share of 82 cents on revenue of $7.5 billion, which would represent revenue growth of 5.5%.

More importantly, after posting 14% growth in international markets in the July quarter, I want to see how well Halliburton is able to maintain that level of improvement. With roughly half of the company's business originating from North America, accounting for two-thirds of its profits), the importance of better global diversification can't be overstated.

Management understands the importance of establishing a larger footprint overseas. But so does Schlumberger and Baker Hughes. Having said all that, it's still tough to bet against Halliburton's strong position in things like production enhancements and offshore tools.

I'm not going to jump into this stock today, but I can see the appeal, especially since management recently announced a $3.3 billion stock buyback. Outside of all of that, the stock seems fairly valued.

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.