On Monday, JPMorgan reacted to Halliburton (NYSE:HAL)'s recent performance by adjusting its price target for the company's shares. The new target is set at $40.00, down from the previous $45.00, while the Overweight rating remains unchanged. The decision follows Halliburton's share price decline of 5.6% on Friday, which underperformed the OSX Index by 4.21%.
Halliburton experienced a disappointing second quarter in 2024, missing operating expectations and subsequently reducing its full-year guidance. The market had anticipated a modest downward revision for the second half of 2024 North America (NAM) projections.
However, the company's forecast of a 6% to 8% year-over-year revenue drop in NAM, coupled with a slight reduction in international revenue expectations, came as an unwelcome surprise.
The guidance adjustment was attributed to lower NAM activity trends and the company's decision to retire several legacy hydraulic fracturing fleets. Halliburton's CEO, Miller, has indicated a belief that the latter half of 2024 will mark the low point in this cycle for NAM activity, with expectations for an increase in 2025.
He anticipates a rise in NAM activities as new development plans are implemented by companies involved in mergers and acquisitions, divested assets are transferred to smaller operators, and natural gas activity sees a resurgence.
Despite the lowered expectations for 2024, Halliburton's management expressed optimism about various elements of its technology portfolio. In North America, the company highlighted the successful adoption of its iCruise X Rotary Steerable System (RSS) tool, which has seen a 45% year-to-date usage increase in the Permian Basin. Additionally, the company is introducing the next generation of its Octiv platform, which facilitates automated fracturing with Zeus electronic fleets.
Internationally, Halliburton has revised its full-year revenue goal to a 10% increase, down from the previous low double-digit growth prediction. This change reflects a slight shift in activity to 2025. However, the company's artificial lift segment is reportedly growing at twice the rate of its international business, indicating some positive developments despite the overall reduction in revenue expectations.
In other recent news, Halliburton has reported a second-quarter earnings per share (EPS) of $0.80, slightly surpassing Citi's prediction and meeting the consensus estimate.
However, the company's revenue of $5.83 billion fell short of expectations, attributed to a 4% lower than anticipated revenue in the North American market. Despite the shortfall, Halliburton's free cash flow for the quarter was strong at $793 million, substantially surpassing Citi's estimate and consensus forecast.
Halliburton has also seen a rise in quarterly profits due to steady international client demand, notably 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 and BofA Securities have reduced their price targets for the company's shares, while Citi has maintained its Buy rating despite reducing its second quarter revenue and EBITDA estimates for Halliburton.
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. These are the recent developments that investors interested in Halliburton might find noteworthy.
InvestingPro Insights
Following JPMorgan's revised price target for Halliburton, real-time data from InvestingPro provides further context to the company's financial health and market position. With a market capitalization of $30.45 billion and a P/E ratio sitting at 11.43, Halliburton presents a valuation that may attract investors looking for potentially undervalued opportunities. The company's adjusted P/E ratio for the last twelve months as of Q2 2024 is slightly lower at 11.29, suggesting a steady earnings outlook.
InvestingPro Tips highlight that Halliburton's stock has experienced low price volatility, trading near its 52-week low, which could be a point of interest for value investors. Additionally, the company has demonstrated a commitment to shareholder returns, maintaining dividend payments for 54 consecutive years with a current dividend yield of 1.98%. This dedication to dividends may appeal to income-focused investors, especially in a volatile market environment.
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