Why Halliburton (HAL) is Falling Today

NEW YORK (TheStreet) -- Halliburton  (HAL) was falling 2.1% to $49.61 on Tuesday after the oilfield services company forecast declines across multiple service areas this year.

Houston-based Halliburton expects a seasonal decline in international sales and net income in the first quarter as a result of fewer software and equipment sales and weather-related issues in the North Sea, the company said in a statement. Halliburton does expect margins to improve in the second quarter and anticipates a rebound in Eastern hemisphere activity levels. Halliburton also foresees a larger-than-usual seasonal decline in Latin America because of higher costs in Brazil and the gradual decline of the Mexico Southern Alliance 2 project.

Halliburton reported fourth-quarter earnings of 93 cents a share minus non-recurring items. Revenues also increased 4.8% year-over-year to $7.64 billion. Adjusted operating income increased 2% sequentially thanks to record revenue in the Middle East, Asia, Europe, Africa and Commonwealth of Independent States. 

TheStreet Ratings team rates HALLIBURTON CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate HALLIBURTON CO (HAL) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.1%. Since the same quarter one year prior, revenues slightly increased by 5.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to $1,078.00 million or 38.56% when compared to the same quarter last year. In addition, HALLIBURTON CO has also modestly surpassed the industry average cash flow growth rate of 30.43%.
  • HAL's debt-to-equity ratio of 0.61 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that HAL's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.73 is high and demonstrates strong liquidity.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 40.37% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • HALLIBURTON CO has improved earnings per share by 21.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HALLIBURTON CO reported lower earnings of $2.77 versus $3.26 in the prior year. This year, the market expects an improvement in earnings ($3.11 versus $2.77).
  • You can view the full analysis from the report here: HAL Ratings Report

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