Halliburton Co. (NYSE:HAL) reports preliminary financial results for the quarter ended 2012-09-30.
Halliburton Company (NYSE:HAL) recently reported its preliminary financial results based on which we provide a unique peer-based analysis of the company. Our analysis is based on the company’s performance over the last twelve months (unless stated otherwise). For a more detailed analysis of this company (and ovhttp://www.valuewalk.com/wp-admin/post-new.phper 40,000 other global equities) please visit www.capitalcube.com
Halliburton Co.’s analysis versus peers uses the following peer-set: Schlumberger Limited. (NYSE:SLB), National-Oilwell Varco, Inc. (NYSE:NOV), Baker Hughes Incorporated (NYSE:BHI), Cameron International Corporation (NYSE:CAM), Technip (PINK:TKPPY), Weatherford International Ltd (NYSE:WFT), Oceaneering International (NYSE:OII), Dresser-Rand Group Inc. (NYSE:DRC), Superior Energy Services, Inc. (NYSE:SPN) and Seacor Holdings, Inc. (NYSE:CKH). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.
|Quarterly (USD million)
|Revenue Growth %
|Net Income Growth %
|Net Margin %
|ROE % (Annualized)
|ROA % (Annualized)
Halliburton Co. trades at a lower Price/Book multiple (2.1) than its peer median (6.4). We classify HAL-US as Harvesting because of the market’s low expectations of growth (PE of 11.1 compared to peer median of 19.2) despite its relatively high returns (ROE of 21.0% compared to the peer median ROE of 13.0%).
The company’s median net profit margins of 10.2% and relative asset efficiency (asset turns of 1.2x compared to peer median of 0.8x) give it some operating leverage. HAL-US’s net margin is less than (but within one standard deviation of) its five-year average net margin of 11.4%.
The company enjoys both better than peer median annual revenue growth of 38.1% and better than peer median earnings growth performance 67.4%. HAL-US currently converts every 1% of change in annual revenue into 1.8% of change in annual reported earnings. We view this company as a leader among its peers.
HAL-US’s return on assets is above its peer median both in the current period (12.2% vs. peer median 6.0%) and also over the past five years (12.6% vs. peer median 8.5%). This performance suggests that the company’s relatively high operating returns are sustainable.
The company’s gross margin of 25.3% is around peer median suggesting that HAL-US’s operations do not benefit from any differentiating pricing advantage. However, HAL-US’s pre-tax margin is more than the peer median (15.1% compared to 11.1%) suggesting relatively tight control on operating costs.
Growth & Investment Strategy
While HAL-US’s revenues growth has been above the peer median (10.7% vs. 6.0% respectively for the past three years), the stock’s PE ratio of 11.1 is less than the peer median. This implies that the company’s earnings are peaking and the market expects a decline in its growth expectations.
HAL-US’s annualized rate of change in capital of 20.3% over the past three years is around the same as its peer median of 18.5%. This investment has generated a better than peer median return on capital of 13.8% averaged over the same three years. The greater than peer median rate of return suggest that the company may be under investing in growth.
HAL-US’s net income margin for the last twelve months is around the peer median (10.2% vs. peer median of 8.7%). This average margin and relatively conservative accrual policy (1.2% vs. peer median of 0.8%) suggests possible understatement of its reported net income.
HAL-US’s accruals over the last twelve months are around zero. However, this modestly positive level is also greater than the peer median which suggests some amount of building of reserves.
Halliburton Co. provides oil and gas exploration and its related services. The company adds value through the entire lifecycle of oil and gas reservoirs and integrates products and services, starting with exploration and development, moving through production, operations, maintenance, and conversion and refining, to infrastructure and abandonment. It is a leading provider of services and products to the energy industry related to the exploration, development, and production of oil and natural gas. The company operates its business through two segments: Completion & Production, and Drilling & Evaluation. The Completion & Production segment delivers cementing, stimulation, intervention, pressure control and completion services. This segment consists of Production enhancement services, completion tools and services, cementing services and Boots & Coots. Its Production Enhancement services include stimulation services and sand control services. Its completion tools and services include subsurface safety valves and flow control equipment, surface safety systems, packers and specialty completion equipment, intelligent completion systems, expandable liner hanger systems, sand control systems, well servicing tools, and reservoir performance services. The reservoir performance services include testing tools, real-time reservoir analysis, and data acquisition services. The cementing services involve bonding the well and well casing while isolating fluid zones and maximizing wellbore stability. The Boots & Coots include well intervention services, pressure control, equipment rental tools and services, and pipeline and process services. The Drilling & Evaluation segment provides field and reservoir modeling, drilling, evaluation, and precise wellbore placement solutions that enable customers to model, measure and optimize their well construction activities. This segment consists of fluid services, drilling services, drill bits, wire-line and perforating services, testing and subsea, software and asset solutions and integrated project management and consulting services. The fluid services provide drilling fluid systems, performance additives, completion fluids, solids control, specialized testing equipment, and waste management services for oil and natural gas drilling, completion, and work-over operations. The drilling services provide drilling systems and services, including directional and horizontal drilling, measurement-while-drilling, logging-while-drilling, surface data logging, multilateral systems, underbalanced applications, and rig site information systems. The drill bits provides roller cone rock bits, fixed cutter bits, hole enlargement and related down-hole tools and services used in drilling oil and natural gas wells. The wire-line and perforating services include open-hole wire-line services that provide information on formation evaluation, including resistivity, porosity, density, rock mechanics, and fluid sampling. The perforating services include tubing-conveyed perforating services and products. The testing and subsea services provide acquisition and analysis of dynamic reservoir information and reservoir optimization solutions to the oil and natural gas industry utilizing down-hole test tools, data acquisition services using telemetry and electronic memory recording, fluid sampling, surface well testing, subsea safety systems, and reservoir engineering services. The software and asset solutions supplies integrated exploration, drilling, and production software information systems, as well as consulting and data management services for the upstream oil and natural gas industry. The Drilling & Evaluation segment also provides oilfield project management and integrated solutions to independent, integrated, and national oil companies. Its segments offer products and services to upstream oil and gas customers worldwide, ranging from the manufacturing of drill bits and other down-hole and completion tools to pressure pumping services. The company was founded by Erle P. Halliburton in 1919 and is headquartered in Houston, TX.
The information presented in this report has been obtained from sources deemed to be reliable, but AnalytixInsight does not make any representation about the accuracy, completeness, or timeliness of this information. This report was produced by AnalytixInsight for informational purposes only and nothing contained herein should be construed as an offer to buy or sell or as a solicitation of an offer to buy or sell any security or derivative instrument. This report is current only as of the date that it was published and the opinions, estimates, ratings and other information may change without notice or publication. Past performance is no guarantee of future results. Prior to making an investment or other financial decision, please consult with your financial, legal and tax advisors. AnalytixInsight shall not be liable for any party’s use of this report. AnalytixInsight is not a broker-dealer and does not buy, sell, maintain a position, or make a market in any security referred to herein. One of the principal tenets for us at AnalytixInsight is that the best person to handle your finances is you. By your use of our services or by reading any our reports, you’re agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that AnalytixInsight, its directors, its employees, and its agents will not be liable for any investment decision made or action taken by you and others based on news, information, opinion, or any other material generated by us and/or published through our services. For a complete copy of our disclaimer, please visit our website www.analytixinsight.com.