Halliburton (HAL) Down 1.9% Since Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Halliburton Company (NYSE:HAL) . Shares have lost about 1.9% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Halliburton reported better-than-expected third-quarter profits, courtesy of improved utilization and pricing gains in North America – the company’s largest market by sales.

Halliburton’s income from continuing operation came in at 42 cents per share, above the Zacks Consensus Estimate of 38 cents – the thirteenth consecutive quarterly outperformance. Moreover, revenues of $5,444 million beat the Zacks Consensus Estimate of $5,318.9 million.

North American Market Booming

Along the results, Halliburton also sounded optimistic in its view that the North American land market is improving rapidly, driven by increased utilization and pricing - particularly for pressure pimping. As it is, rig counts have generally been rising during the last one and half years since plunging to an all-time low of 404 in May 2016, with the addition of a flood of new units. As a proof of the recovery, Halliburton grew its domestic land revenue by 14% sequentially, well ahead of the U.S. land rig count growth of 6%.

Additionally, Halliburton’s international market proved resilient in the face of challenging circumstances. The company’s impressive expense management for the last several quarters helped regional sales rising more than 4% from the second quarter.

Segmental Performance

Operating income from the Completion and Production segment was $525 million, significantly higher than the year-ago level of $24 million. The division also improved from previous quarter’s income of $397 million, helped by better utilization and pricing in the North American land market - especially in Halliburton’s pressure pumping, completion tools and cementing product service lines.

Meanwhile, Drilling and Evaluation unit profit improved from $151 million in the third quarter of 2016 to $180 million this year. The number was also above the $125 million earned in the June quarter. The outperformance was on account of higher drilling activity in the Middle East, North America and Latin America. This was supported by an expanding Consulting and Project Management product line in the Eastern Hemisphere.

Balance Sheet

Halliburton’s capital expenditure in the third quarter was $342 million.

As of Sep 30, 2017, the company had approximately $1,898 million in cash/cash equivalents and $10,423 million in long-term debt, representing a debt-to-capitalization ratio of 53%

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to five lower.

VGM Scores

At this time, the stock has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.