SLB Schlumberger Ltd

Major oilfield services provider Halliburton Company (HAL )  is scheduled to report its fourth quarter 2011 results on Monday January 23, 2012 before the start of trading.

The Zacks Consensus Estimate for the to-be-reported quarter is a profit of 99 cents per share (with an upside potential of 1.01%) on revenues of $6.8 billion. In the year-ago quarter, Halliburton recorded a gain of 68 cents per share, while sales came in at $5.2 billion.

Third Quarter Recap

Halliburton’s third-quarter 2011 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 leveraged through its market-share-leading pressure-pumping business).

Earnings per share, excluding special items, came in at 94 cents, beating the Zacks Consensus Estimate of 92 cents and comfortably ahead of the year-ago adjusted profit of 58 cents.

Revenues of $6.5 billion were 40.4% greater than that achieved during the third quarter of 2010 and also surpassed the Zacks Consensus Estimate of $6.4 billion, as sales increased across the company’s business units.

(Read our full coverage on this earnings report: Halliburton 3Q up on North America).

Points to Ponder for Fourth 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 to-be-reported quarter, Halliburton is likely to benefit from bullish U.S. land drilling trends, where activity is trending above expectations.

This is likely to be somewhat offset by pricing competition in international markets that may put pressure on the company’s margins. However, we believe the market has already priced this into the stock’s valuation.

Agreement of Analysts

As a result of the above-mentioned factors, there has been an upward 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 26 analysts covering the stock, 5 have revised their estimates upward for the fourth quarter of 2011, while 2 have gone in the opposite direction.

Magnitude of Estimate Revisions

Despite the analysts revising estimates northward over the past 30 days, the Zacks Consensus Estimate for the quarter has remained static at 99 cents.

Surprise History

The company has a history of positive earnings surprises, surpassing the Zacks Consensus Estimate in each of the last 4 quarters. Halliburton has performed consistently during this period with its average earnings surprise being 6.95%. This implies that the company has beaten the Zacks Consensus Estimate by 6.95% over the last four quarters.

As such, we will not be surprised if Halliburton reports better-than-expected results yet again, particularly after Schlumberger Limited (SLB) – the largest member of the oilfield services contingent – led off reporting for the group by coming out with robust numbers, as the growth in global energy demand and the recent strength in oil prices have helped producers to boost exploration and production spending around the world.

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, its broad and technologically-complex product/service offerings, and its robust financial profile. The company has been benefiting from increased activity in the unconventional shale plays in North America, which has more than made up for the drop in deepwater Gulf of Mexico activity and disruptions in North Africa.

However, recent disclosures in the Deepwater Horizon incident has created some overhang on the stock because of Halliburton’s alleged direct involvement and the ensuing uncertainty regarding its potential liability exposure. We are also concerned by the slow and geographically uneven recovery in Halliburton’s international markets.

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

 
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