On Friday, Citi reaffirmed its Buy rating on shares of Halliburton (NYSE: NYSE:HAL), with a steady price target of $45.00. The company's second-quarter earnings per share (EPS) of $0.80 were reported, which slightly surpassed Citi's prediction of $0.79 and met the consensus estimate. Halliburton's earnings before interest, taxes, depreciation, and amortization (EBITDA) reached $1.332 billion, aligning with Citi's forecast and exceeding consensus estimates by 2%.
Despite this, Halliburton's revenue fell short of expectations, totaling $5.83 billion, which was 2% below the estimates of both Citi and the consensus. This shortfall was attributed to the North American market, where revenue was 4% lower than anticipated, whereas international revenue was on target.
The Completion & Production (C&P) margin outperformed Citi's forecast by 50 basis points, while the Drilling & Evaluation (D&E) margin was 20 basis points below.
Halliburton's free cash flow (FCF) for the quarter was notably strong at $793 million, excluding other investing activities, which substantially exceeded Citi's estimate of $490 million and the consensus forecast of $606 million. Additionally, Halliburton returned value to shareholders by repurchasing $250 million of its stock during the quarter.
The firm's performance and future outlook, particularly in terms of whether international operations can counterbalance domestic challenges, are expected to be crucial for Halliburton's stock going forward.
In other recent news, Halliburton has seen a rise in quarterly profits, attributed to steady international client demand, particularly in the Middle East, Europe, and Africa. This has offset a slight decline in North American revenue, with the company's second quarter net income reaching $709 million.
Amid these developments, several analyst firms have adjusted their outlooks for Halliburton. Stifel has reduced its price target for the company's shares, citing anticipated growth in U.S. profitability and a tightening supply/demand dynamic in the pressure pumping market. BofA Securities has also lowered its price target, based on an updated discounted cash flow valuation, while Citi has reduced its second quarter revenue and EBITDA estimates for Halliburton.
Despite these adjustments, JPMorgan has maintained its Overweight rating on the company, although it has cut its forecast for the second half of 2024 due to lower-than-expected North American activity trends. Lastly, Halliburton has secured a contract for deep-water well constructions in Namibia, which is expected to unlock potential in the region's oil and gas sector.
InvestingPro Insights
In light of Citi's reaffirmation of a Buy rating on Halliburton, current InvestingPro data provides additional context that investors may find valuable. Halliburton's market capitalization stands at $30.41 billion, and the company is trading at a P/E ratio of 12.6, which adjusts to 11.89 when considering the last twelve months as of Q1 2024. This relatively low P/E ratio, especially in relation to near-term earnings growth, suggests that the stock could be undervalued. Moreover, the company's revenue growth over the last twelve months was 6.71%, with a gross profit margin of 19.06%.
InvestingPro Tips highlight that while Halliburton has been profitable over the last twelve months, it trades with low price volatility and maintains a steady dividend, having done so for 54 consecutive years. Additionally, with a dividend yield of 1.87% and a recent dividend growth of 6.25%, the company demonstrates a commitment to returning value to shareholders. These factors, combined with the strong free cash flow reported in the latest quarter, paint a picture of a financially stable company with a potential upside as per analyst predictions of profitability for the year.
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