Tuesday, July 22, 2014

Halliburton Co. (NYSE: HAL) Q2 Earnings

Halliburton Co. (NYSE: HAL) reported Q2 earnings per share (EPS) of $0.91 on Monday with the stock closing for the day at $71.00 representing a 40% appreciation in value since the start of 2014. EPS was below our estimate of $0.95 but matched analyst expectations of $0.91 with overall results for the quarter meeting expectations. Total revenue grew to a record $8.1 billion with revenue from North America rising 11 percent in Q2 from Q1. Overall demand for oil field services grew significantly during Q2 in North America with the expectation of improved margins for the remainder of 2014. The average number of active rigs on land in the U.S. grew to 1,781 further supporting HAL’s growth. HAL’s limited exposure to current U.S. sanctions on Russia, are expected to have a limited impact on earnings going forward according to Chief Operating Officer Jeff Miller on the call.


There were some issues involving revenue timing for Latin America in Q2, which lowered earnings but is expected to normalize over the second half of the year. International earnings were modest with little unexpected results. HAL had acquired Neftex Petroleum Consultants in Q2, which is expected to improve subsurface modeling and improve multiple facets of HAL’s core competencies.


It was also announced that the company would be increasing its stock buyback authorization to $6 billion from $5 billion and that it would be promoting Jeff Miller from chief operating officer to president at the start of next month.  Overall HAL has exceeded our expectations and is positioned well in its industry to continue to grow. While the HAL model has yet to be updated with earnings we are expecting to increase our price target citing a strong outlook in the oilfield services industry.

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