Raymond James Stays Bullish On Halliburton, Lowers Estimates On Tough 2019 Forecast

Although the fourth-quarter results announced Tuesday by Halliburton Company HAL beat estimates, the energy services company likely faces a difficult 2019, with a continued decline in rig counts and a persistent squeeze on pressure pumping prices, according to Raymond James.

The Analyst

Analyst Praveen Narra maintains a Strong Buy rating on Halliburton with a $45 price target.

The Thesis

The better-than-expected Q4 results reported by Halliburton were driven to a large extent by year-end product sales, while the company’s pressure pumping activity is likely to have bottomed during the quarter, Narra said in a Tuesday note.

Pricing pressure has continued to erode margins, leading Raymond James to lower its 2019 estimates, the analyst said.

Yet Halliburton is focused on capital discipline, which is a positive, Narra said. The company has meaningful leverage to the upcycle and could generate free cash flow of over $1 billion during the trough phase Raymond James expects in 2019, the analyst said.

The North American market has been especially affected, with declining activity leading to associated significant weakening in prices during Q4, Narra said, adding that the pricing environment has likely bottomed.

The international markets offer some hope and continue to display signs of improvement, according to Raymond James.