On Thursday, JPMorgan reaffirmed its Overweight rating on Halliburton (NYSE:HAL) with a steady price target of $45.00.
The firm has adjusted its second-half 2024 forecasts for the company due to lower-than-anticipated North American (NAM) activity trends. In the second quarter 2024, U.S. land rig count average of 584 rigs fell short of the anticipated 593 rigs. This decline is expected to lead to softer hydraulic fracturing demand later in the year.
The current trajectory of NAM spending for the latter half of 2024 might not meet initial expectations, as evidenced by a drop in the U.S. rig count and efficiency gains among Exploration & Production (E&P) operators. These factors are believed to exert downward pressure on rig and fracturing utilization. Consequently, JPMorgan now predicts flat sequential NAM revenue in both the third and fourth quarters relative to the second quarter of 2024.
JPMorgan has revised its 2024 revenue and margin projections for Halliburton's Completion and Production (C&P) and Drilling and Evaluation (D&E) segments. The firm now expects a year-over-year decline of 2.8% in NAM revenue, contrasting with Halliburton's guidance for flat revenue. C&P margins are projected to drop slightly to 20.4% in the third quarter and remain at that level in the fourth quarter, resulting in an anticipated full-year C&P margin of 20.5%.
The forecast for Halliburton's 2024 EBITDA has been adjusted to $5,272 million, which is 3% below the sell-side consensus of $5,435 million. Quarterly EBITDA estimates are set at $1,310 million for the second quarter, aligning with consensus, but lower than consensus for the third and fourth quarters by 4% and 6%, respectively.
Despite these adjustments, Halliburton's outlook includes positive growth prospects for its iCruise technology and an expected increase in the proportion of Zeus eFleets, which are secured by long-term contracts, by the end of 2024.
In other recent news, Halliburton has been making notable strides in its operations.
The company reported a robust first quarter for 2024 with significant international revenue growth, recording total revenue of $5.8 billion and an operating margin of 17%. Despite an 8% year-over-year decrease in North American revenue, the company still managed a 5% increase over the previous quarter. The company also generated $487 million in cash flow from operations and repurchased $250 million of its common stock during the quarter.
TD Cowen, an analyst firm, has shown continued confidence in Halliburton, raising its price target to $48 from $47 and maintaining a Buy rating on the stock. The firm noted Halliburton's history of surpassing its guidance and expects that revisions for 2025 will favor North American operations over international ones.
In addition to financial performance, Halliburton has secured a contract from Rhino Resources Ltd. to conduct a series of deep-water well constructions in Namibia. This strategic partnership aims to tap into the potential of the Namibian oil and gas sector, particularly the exploration and appraisal of Block 2914A in the Orange Basin.The operational phase of the project is scheduled to commence in the fourth quarter of 2024.
These are among the recent developments for Halliburton.
InvestingPro Insights
As Halliburton navigates through the challenges of fluctuating North American activity, the latest data from InvestingPro provides a snapshot of the company's financial health and market position. Halliburton's market capitalization stands at $30.13 billion, reflecting its significant presence in the industry. Notably, the company is trading at an attractive P/E ratio of 11.71, which is even more appealing when considering the adjusted P/E ratio for the last twelve months as of Q1 2024 at 11.1. This suggests that Halliburton's stock may be undervalued relative to its near-term earnings growth potential, a point that could interest value-oriented investors.
InvestingPro Tips highlight that Halliburton has maintained dividend payments for 54 consecutive years, which is indicative of its commitment to shareholder returns. Additionally, the company's liquid assets exceed its short-term obligations, providing it with a degree of financial flexibility. These factors, combined with analysts' predictions of profitability this year and over the last twelve months, paint a picture of a company that, despite current headwinds, has a stable foundation and potential for future growth.
For readers looking to delve deeper into Halliburton's financials and stock performance, InvestingPro offers an array of tips—there are 11 additional InvestingPro Tips available that provide further insights. To access these tips and enhance your investment strategy, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.