Halliburton (HAL) Stock Falls After Bank of America/Merrill Lynch Downgrades Energy Sector

NEW YORK (TheStreet) -- Shares of Halliburton  (HAL) were down 0.34% to $41.07 in morning trading Tuesday after Bank of America/Merrill Lynch downgraded the energy sector to "market weight."

The firm made the move after OPEC decided last week not to cut oil production and to keep its target at 30 million barrels per day, a move that could leave the market oversupplied. The announcement sent oil prices spiraling downward.

Bank of America now expects Brent crude oil prices in the range of $70 to $75 for 2015. The firm also expects WTI crude prices to drop to $50 in the next month.

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"With the collapse in crude, the sector now trades at a 20% discount to the S&P 500, where it has historically traded in-line with the market, but further estimate cuts are likely to come, [as] prices are falling faster than earnings are deteriorating," the firm said. 

The stock hit an intraday low of $40.36 as of 11:19 a.m.

Separately, 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 a number of strengths, 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, compelling growth in net income, attractive valuation levels, impressive record of earnings per share growth and largely solid financial position with reasonable debt levels by most measures. 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 16.4%. 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.
  • 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

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