Halliburton Beats Q4 Earnings Estimates; Target Price $25 in Best Case

Halliburton, one of the world’s largest providers of products and services to the energy industry, reported better-than-expected earnings in the fourth quarter, largely driven by cost-cutting and recovery in business demand.

Halliburton reported a net loss of $235 million, or $0.27 per diluted share, for the fourth quarter of 2020. This compares to a net loss for the third quarter of 2020 of $17 million, or $0.02 per diluted share.

Adjusted net income for the fourth quarter of 2020, excluding impairments and other charges, was $160 million, or $0.18 per diluted share. That was higher than the market expectations of 15 cents per share.

The second-biggest services provider’s total revenue rose 9% to was $3.2 billion, up from revenue of $3.0 billion in the third quarter of 2020. Reported operating loss was $96 million in the fourth quarter of 2020 compared to reported operating income of $142 million in the third quarter of 2020.

“We view the strong results (Q4/20 EBITDA 8% better than consensus) as positive, with Halliburton (HAL) demonstrating that increasing activity should flow to the bottom line after completing its $1bn cost-out program in Q3/20,” said Waqar Syed, equity analyst at ATB Capital Markets.

“We think the key driver for HAL’s stock today will be guidance in the earnings call, if provided, but still think the results, high-level commentary, and supportive macro/commodity price environment should help the stock.”

At the time of writing, Halliburton shares traded nearly flat at $20.74 on Tuesday; however, the stock fell over 20% in 2020.

Halliburton Stock Price Forecast

Thirteen analysts who offered stock ratings for Halliburton in the last three months forecast the average price in 12 months at $18.84 with a high forecast of $25.00 and a low forecast of $12.00.

The average price target represents a -9.20% decrease from the last price of $20.75. From those 13 analysts, five rated “Buy”, six rated “Hold” and two rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $20 with a high of $25 under a bull scenario and $8 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the energy company’s stock.

Several other analysts have also recently commented on the stock. Cowen and company raised the target price to $28 from $24. Credit Suisse upped the price objective to $14 from $12.

In addition, Barclays increased the target price to $21 from $14. Stifel raised the target price to $26 from $18. Citigroup upped to buy from neutral; raises price target to $24 from $13.5.

Analyst Comments

“Relative positioning less favourable vs. some global peers: Though it has decreased in absolute size, Halliburton (HAL) still remains more NAm-focused vs. peers, where we see a higher relative risk of downward upstream capex revisions. Cost savings likely at their limit: HAL is winding down a major cost-cutting program, which suggests to us its ability to further cut overhead and significantly surprise on margins is relatively limited,” said Connor Lynagh, equity analyst at Morgan Stanley.

“Risk-reward relatively balanced: We see relatively balanced risk-reward for HAL’s shares and believe a more significant capex shift back into its core markets would be required for meaningful outperformance vs. the group.”

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