On Friday, Citi made an adjustment to Halliburton’s (NYSE:) stock, reducing the price target to $45 from the previous $50, while still holding a positive outlook with a Buy rating. The revision comes amid expectations of a softer domestic fracturing market, leading to a slight decrease in the second quarter revenue and EBITDA forecasts for the oilfield services company.
In detail, Citi has trimmed Halliburton’s second quarter revenue estimate to $5.93 billion, a 1% decrease, and the EBITDA estimate to $1.33 billion, also down by 1%. These figures are still 1% above the consensus. For the third quarter, the firm anticipates no growth in North American revenues, keeping them flat at $2.6 billion, and a 7% sequential decline in fourth quarter revenues to $2.41 billion. This is due to the expectation of greater seasonal weakness, despite efficiency gains in fracturing operations.
Conversely, Halliburton’s international operations are expected to continue their strong performance. Citi maintains its forecast for international revenue, predicting 5% sequential growth in the third quarter and 4% in the fourth quarter, contributing to a 10% year-over-year growth.
The third quarter EBITDA forecast aligns with the consensus at $1.39 billion, while the fourth quarter estimate is set at $1.37 billion, which is 5% below the consensus. Looking further ahead, Citi forecasts a 4% growth in North America and a 7% increase abroad for Halliburton in 2025, leading to an EBITDA of $5.79 billion. However, this projection is 6% lower than previous estimates and 4% below the consensus.
In other recent news, Halliburton has been the subject of several notable developments. JPMorgan has reaffirmed its Overweight rating on Halliburton, despite adjusting its 2024 forecasts for the company due to lower-than-expected North American activity trends. The firm now anticipates a year-over-year decline of 2.8% in North American revenue and a drop in Completion and Production margins to 20.4% for the latter half of 2024. Earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2024 have been revised to $5,272 million, slightly below the sell-side consensus.
In contrast, TD Cowen has demonstrated continued confidence in Halliburton, raising its price target from $47 to $48 and maintaining a Buy rating. The firm recognizes Halliburton’s history of surpassing its guidance and expects future revisions to favor North American operations.
Halliburton has also announced a strong first quarter for 2024, with significant international revenue growth. The company recorded total revenue of $5.8 billion, an operating margin of 17%, and generated $487 million in cash flow from operations. Despite an 8% year-over-year decrease in North American revenue, the company still managed a 5% increase over the previous quarter.
In addition to financial performance, Halliburton has secured a contract from Rhino Resources Ltd. to conduct a series of deep-water well constructions in Namibia. The collaboration aims to tap into the potential of the Namibian oil and gas sector, with the operational phase of the project set to begin in the fourth quarter of 2024.
InvestingPro Insights
In light of Citi’s recent adjustments to Halliburton’s (NYSE:HAL) stock price target, current real-time data from InvestingPro offers additional context for investors. With a market capitalization of $29.75 billion and a P/E ratio standing at 11.58, Halliburton presents a valuation that is notably attractive, particularly when considering its near-term earnings growth potential. This is further underscored by the adjusted P/E ratio for the last twelve months as of Q1 2024, which is slightly lower at 10.97.
InvestingPro Tips highlight Halliburton’s consistent dividend payments for over half a century, a testament to its financial resilience and commitment to shareholder returns. Additionally, the company’s liquid assets surpassing short-term obligations suggest a solid liquidity position, which is crucial for navigating the cyclical nature of the oilfield services industry.
Despite the softer domestic market outlook, Halliburton’s stock is trading near its 52-week low, potentially offering a favorable entry point for long-term investors. Moreover, analysts predict profitability for the year, backed by a profitable track record over the last twelve months. For those interested in further insights and tips, InvestingPro has additional information available, which can be accessed with a special offer: use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 9 additional InvestingPro Tips for Halliburton that could further inform investment decisions.
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