Earnings Preview: Halliburton - Analyst Blog
20 Julho 2012 - 10:45AM
Zacks
Major oilfield services provider
Halliburton Company (HAL) is scheduled to report
its second quarter 2012 results on Monday July 23 before the start
of trading.
The Zacks Consensus Estimate for the
to-be-reported quarter is a profit of 75 cents per share (with a
downside risk of 1.33%) on revenues of $6.9 billion. In the
year-ago quarter, Halliburton recorded a gain of 81 cents per
share, while sales came in at $5.9 billion.
First Quarter
Recap
Halliburton’s first-quarter 2012
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 89 cents, beating the Zacks Consensus
Estimate of 86 cents and comfortably ahead of the year-ago adjusted
profit of 61 cents.
Revenues of $6.9 billion were 30.0%
greater than that achieved during the first quarter of 2011 and
also surpassed the Zacks Consensus Estimate of $6.8 billion, as
sales increased across the company’s business units.
(Read our full coverage on this
earnings report: Halliburton Tops Estimates Yet Again).
Points to Ponder for
Second 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.
However, a higher-than-expected
spike in the cost for guar gum – a key constituent of the company’s
market-leading hydraulic fracturing ('fracking') procedure – will
adversely impact its second quarter results.
Guar gum, a bean grown mostly in
India, apart from being a dairy products thickener is also a main
ingredient of the fracking process, which is used to extract
natural gas by blasting underground rock formations with a mixture
of water, sand and chemicals.
As per Halliburton, demand for guar
gum has gone through the roof in North America following the
growing use of fracking in the extraction of oil and natural gas
liquids from shale. This has led to concerns about the commodity’s
potential shortage later in 2012, thereby driving up guar gum
prices more rapidly than previously expected
Additionally, the North American
land rig count, which has experienced strong upward momentum over
the last twelve months, may plateau in the near future as growth in
highly-productive horizontal drilling has led to a natural gas
supply overhang and relatively weak natural gas prices in the U.S.
market. This is likely to be only partially offset by the continued
growth of oil- and liquids-rich reservoirs. A slowdown in U.S. land
drilling will adversely impact Halliburton’s business.
Agreement of
Analysts
As a result of the above-mentioned
factors, there has been a downward bias among Halliburton’s June
quarter estimate revisions, particular over the past 30 days. Out
of the 22 estimates for the second quarter of 2012, 5 have been
revised downwards, while 4 have gone in the opposite direction.
Magnitude of Estimate
Revisions
As a result of estimates being
revised southward over the past 30 days, the Zacks Consensus
Estimate for the quarter has dropped by a penny (from 76 cents to
75 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 4.79%. This implies that the company has beaten the Zacks
Consensus Estimate by 4.79% over the last four quarters.
However, this time around, we do not
expect Halliburton – the second largest member of the oilfield
services contingent after Schlumberger Limited
(SLB) – to surpass expectations, as it has been struggling to keep
pace with the bursting guar prices, adversely affecting its North
American margins and overall profitability.
Short-Term
Rating
Halliburton shares currently retain
a Zacks #3 Rank, which translates into a short-term Hold
rating.
HALLIBURTON CO (HAL): Free Stock Analysis Report
SCHLUMBERGER LT (SLB): Free Stock Analysis Report
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