Morgan Stanley Turns Bullish On Halliburton: 'The Cash Is Headed To Investors'

Halliburton Company’s HAL stock underperformed rival Schlumberger NV SLB in 2021 as investors focused on heavier international portfolios and energy transition opportunities, where the company compares less favorably, according to Morgan Stanley.

The Halliburton Analyst: Connor Lynagh upgraded Halliburton from Equal-weight to Overweight with a $30 price target. 

The Halliburton Thesis: The company could generate higher-than-expected free cash flows going ahead, and “communicate a clear message that the cash is headed to investors,” Lynagh said in the upgrade note.

“We have yet to see a service company commit as explicitly to a long-term, structured payout profile, but we are increasingly thinking HAL can differentiate itself with this type of capital allocation strategy,” the analyst wrote.

"We think the Street is underestimating HAL's commitment to capital restraint, and commensurately its FCF,” he added.

Halliburton’s announcement of cash being returned to investors could come as early as the fourth-quarter earnings season, which is likely to be “a meaningful catalyst,” Lynagh said.

HAL Price Action: Shares of Halliburton were trading 6.59% higher at $25.57 Tuesday morning.