Merger related issues outweigh potential for greater synergies in the oilfield services company, analysts' said.
"For Halliburton, risks of closing and revenue leakage related to its merger with Baker Hughes (BHI) outweigh potential for greater synergies or of a duopoly structure and we lower HAL's price target to $67 from $74," analysts' noted.
"BHI and Schlumberger Limited (SLB) are clearer beneficiaries-especially near term. We also think the merger is incrementally negative for weaker U.S. pressure pumpers as HAL can drive efficiency (=effective capacity) and share gain," analysts added.
Separately, TheStreet Ratings team rates HALLIBURTON CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate HALLIBURTON CO (HAL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, impressive record of earnings per share growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HAL's revenue growth has slightly outpaced the industry average of 15.4%. Since the same quarter one year prior, revenues rose by 16.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 70.4% when compared to the same quarter one year prior, rising from $706.00 million to $1,203.00 million.
- HALLIBURTON CO reported significant earnings per share improvement 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 $2.37 versus $2.77 in the prior year. This year, the market expects an improvement in earnings ($4.03 versus $2.37).
- Despite currently having a low debt-to-equity ratio of 0.50, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that HAL's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.65 is high and demonstrates strong liquidity.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Energy Equipment & Services industry and the overall market on the basis of return on equity, HALLIBURTON CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full analysis from the report here: HAL Ratings Report