Earnings Preview: Halliburton Co. - Analyst Blog

Leading oilfield service provider, Halliburton Company (HAL), is expected to report its fourth quarter and full year 2010 earnings on Monday, January 24, 2011, before the opening bell. The Zacks Consensus Estimate for the fourth quarter is 63 cents per share, while that for fiscal 2010 is $2.01 per share.

Third Quarter 2010 Recap

Halliburton's earnings per share, excluding one-time items, came in at 58 cents, surpassing the Zacks Consensus Estimate of 56 cents and way above the year-ago adjusted profit of 31 cents per share. Revenues increased 30% year over year to $4.7 billion and were slightly ahead of the Zacks Consensus Estimate of $4.6 billion.

The company's third quarter profitability was driven by the unique strength of its balanced geographic portfolio. Halliburton benefited from the robustness of the North American markets that counterbalanced the flat international performance.

Agreement of Analysts

Analysts exhibit a positive sentiment for Halliburton in the to-be-reported quarter based on a bullish pressure pumping market and indications of strong revenue and margins in North America.  

In the last 30 days, out of the 32 analysts covering the stock, 9 analysts have raised their estimates for the fourth quarter of 2010 and none of the analysts have lowered their estimates for the same quarter. In the last 7 days, 3 analysts have revised the estimate upward while none of the analysts have moved in the opposite direction.

For fiscal year 2010, the analysts have followed a trend similar to the fourth quarter discussed above for the last week. However, over the past one month, 8 analysts raised their estimates.

Magnitude of Estimate Revisions

Taking into effect the analysts' earnings revision, the Zacks Consensus Estimate for the fourth quarter and full year 2010 went up by a penny each to 63 cents and $2.01 per share, over the last 30 days.

However, for the past one week, the Consensus Estimate for both the quarter and full year remained static.

Surprise History

Halliburton exhibited a positive earnings surprise trend over the last four quarters. The company recorded a minimum surprise of 3.6% in third quarter 2010 while a maximum of 40.5% in second quarter 2010. On an average, the earnings surprise was 13.9%.

The current Zacks Consensus Estimates for the fourth quarter and fiscal 2010 show upside potential of 1.6% and 0.0%, respectively.

Our Recommendation

Houston, Texas-based Halliburton enjoys a strong competitive position within the global oilfield services industry. The bullish near-term land drilling trends and rig count fundamentals in the U.S. are expected to act as positive catalysts for the company's performance in the upcoming quarter. We also expect Halliburton to render high production volumes courtesy its position in the fertile shale plays like Haynesville, Eagle Ford and Bakken.

However, Halliburton is exposed to intense competition in the market from peers like Baker Hughes (BHI) and Schlumberger Limited (SLB). The depressing natural gas prices and regulatory restrictions on drilling activities are also possible headwinds that could hamper the company's results. We maintain our long-term Neutral recommendation on the stock.

 
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