Qualivian Investment Partners Up 30% YTD; Long ORLY Thesis
Qualivian Investment Partners commentary for the second quarter ended July 30, 2020. Q2 2020 hedge fund letters, conferences and more “Short-term investors will accept a 20% gain because they didn’t spend the time to develop the conviction and foresight to see the next 500%.” - Ian Cassell Executive Summary Readers of investment letters fall into Read More
Before the bell this morning, Halliburton Company (NYSE:HAL) reported earnings for the first quarter of 2012. Halliburton Company (NYSE:HAL) reported earnings of net 69c a share (or $826 million excluding $300 million loss contingency due to Monaco) versus 56c estimated by analysts. Halliburton’s consolidated revenue in the first quarter of 2012 was $6.9 billion, compared to $5.3 billion in the first quarter of 2011.
Reported income from continuing operations for the first quarter of 2012 was $635 million, or $0.69 per diluted share, compared to $512 million, or $0.56 per diluted share, for the first quarter of 2011. Reported net income attributable to company for the first quarter of 2012 was $627 million, or $0.68 per diluted share, compared to $511 million, or $0.56 per diluted share for the first quarter of 2011.
Going back to Halliburton Company (NYSE:HAL) ’s fourth quarter earnings, warm winter and too much natural gas production weighed heavily on Halliburton’s earnings. The cost of moving equipment and lower production hurt the company’s bottom line.
Natural rig counts were down 17% for the quarter, with North America contributing to a small portion of the number.
If you look at a breakdown of Halliburton you will see that the company’s North American Rig division counts for 67.7% of the share price, Middle East/Asian Rigs 11.9%, Latin American Rigs 11.4% and Europe/Africa/CIS Rig 9%.
This is important because we can determine from this data that since Halliburton has a very small exposure to Europe, they will not take a noticeable hit from the European debt crisis.
However, the 68% North American exposure makes Halliburton very sensitive to domestic energy issues such as extremely low natural gas prices and over $100 oil. As a side note, the recommendations and price targets that you see on Trefis do not reflect an endorsement by myself or Valuewalk.
From a fundamental perspective Halliburton appears to be pretty undervalued by some measures. Halliburton sports a P/E of 9 with a PEG of .34, both undervalued indicators. However, you can not simply tell if a company is undervalued by those aspects. Halliburton has a price/sales of 1.19 and a price to book of 2.24. These indicators are within normal.
Next, determining the debt load of a company is important to see if they are overburdened by debt and interest payments. Luckily, Halliburton has a total debt/equity of 36 which is well within normal load.
Lastly, return on assets, return on investment and return on equity are all above their 5 year averages and above industry averages. Remember this fundamental analysis is simply a brief and quick overview, to truly look at a company’s fundamentals you need to look over financial filings and documents as well.
Overall Halliburton’s quarter [fill in]. Keep in mind that Halliburton’s earnings tend to reflect its rivals Baker Hughes and Schlumberger, so keep an eye on those earnings as well.