Analysts Optimistic On Halliburton's Outlook Following Q1 Report

Oilfield services company Halliburton Company HAL reported forecast-beating first-quarter results Monday, yet the stock reacted with a modest move to the downside.

The Analysts

Raymond James analyst Praveen Narra maintained a Strong Buy on Halliburton with a $45 price target.

Morgan Stanley analyst Connor Lynagh maintained an Overweight rating and $40 price target.

Raymond James: Halliburton Our Highest Conviction Large-Cap 

Notwithstanding the slightly better-than-expected first-quarter results, Halliburton investors are skittish about the second half of 2019, Narra said in a Monday note. The fears are overdone, he said. 

The North American business has bottomed, and international is in the process of a long-term recovery, the analyst said. 

Narra sees significant positive pricing on the horizon. The dissipation of mobilization costs in Halliburton's international business — along with better utilization of underabsorbed capacity — will lead to solid international topline growth as well as attractive incremental margins, he said. 

"We view Halliburton as the having the highest leverage to the growing commodity upcycle among large-cap peers and remains our highest-conviction large cap name." 

Raymond James views Halliburton as attractive on a relative and absolute basis.

Morgan Stanley: Q1 Could Mark Near-Term Earnings Trough

The first quarter should mark a near-term trough in earnings given expectations that Halliburton's reported segments are likely to see improving profitability for the next several quarters, Lynagh said in a Monday note. 

The analyst foecast a healing North American completions market and an international recovery.

Citing Monday's margin beat and the conservative guidance, Lynagh upwardly revised the EBIT forecasts for Halliburton's North American-heavy Completion and Production business by 13 percent for 2019 and 12 percent for 2020.

Margins are a near-term headwind in the Drilling & Exploration business, the analyst said.

With Halliburton calling for a relatively strong back-half improvement in profitability, Morgan Stanley raised its EBIT forecast for the segment by 3 percent for 2019 and 12 percent for 2020.

The Price Action

After edging down 0.13 percent to $31.09 Monday in reaction to its quarterly results, Halliburton stock was rising 0.51 percent to $31.24 at the time of publication Tuesday. 

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