On Monday, JPMorgan adjusted its outlook on Halliburton (NYSE:HAL), a major player in the oilfield services sector. The firm's analyst revised the price target downward to $35 from the previous $40, while keeping an Overweight rating on the company's shares. The adjustment follows Halliburton's second-quarter earnings call, where the company revised its full-year North America (NAM) revenue expectations, anticipating a 6-8% year-over-year decline due to softer activity trends and the retirement of several legacy fracturing fleets.
The analyst from JPMorgan highlighted that despite the lowered expectations, Halliburton is expected to largely meet third-quarter 2024 projections. The firm's estimates for the company's third-quarter earnings per share (EPS) and earnings before interest, taxes, depreciation, and amortization (EBITDA) are $0.75 and $1,272 million, respectively, aligning closely with the street estimate (STe) of $0.76 EPS and $1,276 million EBITDA.
The forecast accounts for a 2% sequential decrease in Completion & Production (C&P) revenue and a contraction in C&P margins, partly due to temporary international challenges, including shipyard-related downtime that is expected to resolve by the fourth quarter of 2024.
For the third quarter, JPMorgan anticipates Halliburton will generate free cash flow (FCF) of $591 million, despite a working capital headwind of approximately $87 million. The analysis suggests an increase in FCF to $845 million in the fourth quarter of 2024. Additionally, the firm projects Halliburton will engage in share buybacks of $200 million in the third quarter and $300 million in the fourth quarter.
Despite the downward revision for NAM revenue, Halliburton's focus on expanding its competitive position in fracturing technology remains strong. The company's Zeus eFrac technology and Octiv platform are expected to enhance the quality of fracturing services, offering productivity benefits to exploration and production companies. Halliburton's ability to secure multiple long-term agreements for its Zeus eFrac newbuilds in the third quarter underscores the industry's recognition of its advanced fracturing solutions.
In other recent news, Halliburton, a leading oilfield services company, has been the focus of significant developments. The company reported a major cybersecurity breach, resulting in unauthorized access and data exfiltration from its systems. Despite the incident, Halliburton reassured that it has not experienced, and does not anticipate, a material impact on its financial condition or results of operations.
On the financial front, Halliburton reported second-quarter earnings per share (EPS) of $0.80, in line with consensus estimates, and a robust free cash flow of $793 million, exceeding expectations. However, its revenue of $5.83 billion fell short of projections, primarily due to lower than expected revenue in the North American market.
In the realm of analyst notes, Jefferies adjusted its outlook on Halliburton by reducing the price target to $46.00, maintaining a Buy rating on the stock. RBC Capital Markets, on the other hand, downgraded Halliburton's stock from an Outperform rating to Sector Perform, citing less attractive positioning in the global Exploration & Production cycle.
Lastly, Halliburton declared a quarterly dividend of $0.17 per share for the third quarter of 2024, demonstrating its commitment to providing returns to shareholders.
InvestingPro Insights
To complement JPMorgan's analysis, recent data from InvestingPro offers additional perspective on Halliburton's financial position. The company's P/E ratio stands at 9.45, indicating that it's trading at a relatively low valuation compared to its earnings. This aligns with one of the InvestingPro Tips, which suggests that Halliburton is "trading at a low P/E ratio relative to near-term earnings growth."
Despite the challenges in North America revenue highlighted in the article, Halliburton's financials show some resilience. The company's revenue for the last twelve months as of Q2 2024 was $23.18 billion, with a modest growth of 3.42%. Moreover, Halliburton has maintained dividend payments for 54 consecutive years, demonstrating a commitment to shareholder returns even in challenging market conditions.
It's worth noting that InvestingPro offers 10 additional tips for Halliburton, providing investors with a more comprehensive view of the company's financial health and market position. These insights could be particularly valuable given the current market dynamics and JPMorgan's revised outlook.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.