Raymond James: Halliburton's Performance Will Improve This Year, Into 2020

Halliburton Company’s HAL first-quarter performance likely represents a trough and results could improve in the back half of 2019 and into 2020 — not just in the U.S., but across all geographies, according to Raymond James.

The Analyst

Raymond James’ Praveen Narra maintains a Strong Buy rating on Halliburton with an unchanged $45 price target.

The Thesis

While the U.S. rig count has continued to decline, completions activity has improved significantly since December, Narra said in a Monday note. 

Halliburton’s first-quarter results are likely to be impacted by weather and seasonality, and the company’s U.S. contracting and procurement segment could continue to face pricing pressure early in the first quarter, the analyst said. The analyst expects C&P revenues to decline 8.8 percent sequentially and margins to contract by 350bps in the first quarter, he said. 

Things should start improving from the second quarter onward, with a modest 90bps improvement in the U.S. C&P margins and 0.7-percent sequential revenue growth, Narra said. 

The U.S. rig count on the drilling and evaluation side is expected to decline through the first half of 2019, the analyst said. He projects a 9.3-percent decline in first-quarter D&E revenues, with a 122bps contraction in margins. 

In the international markets, there are early signs of spending growth, according to Raymond James.

Revenue growth in the international C&P market is estimated to be a healthy 5.4 percent, although this is still lagging growth in the D&E segment, Narra said. 

Price Action

Halliburton shares were up more than 2 percent at $29.89 at the time of publication Monday. 

Related Links:

Benzinga's Top Upgrades, Downgrades For March 11, 2019

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