SLB Schlumberger Ltd

Major oilfield services provider Halliburton Co. (HAL) is scheduled to report its first quarter 2011 results on April 18, 2011, before the start of trading.

The Zacks Consensus Estimate for the to-be-reported quarter is a profit of 59 cents per share (with a downside potential of 1.7%) on revenue of $4.9 billion. In the year-ago quarter, Halliburton recorded a gain of 28 cents per share, while sales came in at $3.8 billion.

Fourth Quarter Recap

Halliburton’s fourth-quarter 2010 results came in better than expected, helped by the strength and sustainability of the all-important North American onshore activity levels (to which the company is heavily exposed through its market-share-leading pressure-pumping business).

Earnings per share, excluding special items, came in at 68 cents, beating the Zacks Consensus Estimate of 63 cents and were comfortably ahead of the year-ago adjusted profit of 28 cents.

Revenues of $5.2 billion were 40.0% greater than that achieved during the fourth quarter of 2009 and also surpassed the Zacks Consensus Estimate of $4.9 billion, as sales increased across the company’s business units.

(Read our full coverage on this earnings report: Halliburton Posts Big Gain.)

Points to Ponder for First Quarter

Halliburton enjoys a strong competitive position within the global oilfield services markets. We like the company’s broad and technologically-complex product and service offerings, along with its robust financial profile.

It remains the best-positioned company in the U.S. pressure pumping market, with significant acreage positions in the highest profile plays, such as the Haynesville, Eagle Ford shale and Bakken. In the near term, Halliburton is likely to benefit from bullish U.S. land drilling trends, where activity is tracking above expectations.

The key negative, in our view, is the company’s recent assertion that March quarter results will be adversely affected by abnormally seasonal weather and disruptions in the Middle East/North Africa markets. The aggregate impact is expected to be 5–8 cents per share for North American seasonality and 3–4 cents per share associated with the North African unrest.  

(Read our full coverage on this story: Mid-East Crisis to Cut HAL's Profit.)

Agreement of Analysts

As a result of the above-mentioned factors, there has been a downward bias among the analysts regarding Halliburton’s outlook. In particular, we see a notable number of estimate revisions over the past 30 days.

Out of the 32 analysts covering the stock, 13 have revised their estimates downward for the first quarter of 2011, while 2 have gone in the opposite direction.

Magnitude of Estimate Revisions

Consequent to analysts revising estimates southward over the past 30 days, the Zacks Consensus Estimate for the quarter has gone down by 3 cents (from $62 cents to 59 cents).

Our Recommendation

Halliburton shares currently retain a Zacks #3 Rank, which translates into a short-term 'Hold' rating. We are also maintaining our long-term '"Neutral'" recommendation on the stock.

We like Halliburton’s leading position in the global oilfield services market, along with its broad and technologically-complex product and service offerings, and its robust financial profile. Since the last few quarters, the company has been benefiting from increased activity in the unconventional oil and gas shale plays in North America, which have more than made up for the drop in deepwater Gulf of Mexico activity.

However, the world's second-largest oilfield services company after Schlumberger Ltd. (SLB) continues to feel pressure from intense competition in the market, depressed natural gas prices and the expected curtailment in incremental drilling projects.

As such, we see the stock performing in line with the broader market and prefer to remain on the sidelines.

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