Halliburton Taps Well Of Growth

6/30/2014


  Recent Price
$68
  Dividend
$0.60
  Yield
0.9%
  P/E Ratio
21
  Shares (millions)
853
  Long-Term Debt as % of Capital
36%
  52-Week Price Range
$70.79 - $40.96

Halliburton ($68; HAL) is the second-largest company in the energy equipment & services group, with a stock-market value above $58 billion. The firm operates in 80 countries and employs more than 80,000 people.

Despite its size, Halliburton is light on its feet, adapting well to the ever-more-technical world of energy production. The increasing popularity of horizontal drilling (63% of U.S. rigs operating in 2013 versus 42% in 2009) should benefit experienced operators such as Halliburton, which was the first company to use hydraulic fracturing in the U.S. more than 60 years ago.

Global demand for energy services continues to rise, driven by economic growth in developing markets. Overseas revenue and profits rose in 2013, and the company expects continued growth this year. Last year Halliburton generated 51% of its revenue outside the U.S., up from 45% in 2011.

Halliburton grows like a much smaller company, boosting per-share profits 11% and operating cash flow 55% over the last four quarters. During that period, Halliburton generated free cash flow of $1.68 billion versus a negative $566 million for the year-earlier period. The consensus projects per-share-profit growth of 26% this year and 29% in 2015, with estimates trending higher. Halliburton trades at 17 times that 2014 estimate, a 9% discount to the industry median. Halliburton is a Buy and a Long-Term Buy.

Business breakdown

Halliburton operates in two segments. Completion and production (60% of sales, 62% of operating income in the year ended March) provides cementing, well stimulation, pressure-control, and completion services, as well as specialty chemicals. Drilling and evaluation (40%, 38%) models fields and reservoirs, drills and evaluates wells, and helps set up and operate drilling systems. Last year services accounted for 76% of company sales, with the rest coming from products.

Halliburton collects revenue throughout the production cycle, from locating new deposits of oil and natural gas to well construction to optimizing production at mature fields. The company's broad geographical and industry presence limits risks from political unrest or economic weakness in a single region. No single customer, or any country other than the U.S., accounts for more than 10% of Halliburton's revenue.

Conclusion

The worldwide rig count rose 6% in the 12 months ended May, and Halliburton expects continued growth this year. Pricing pressures and a declining rig count weighed on Halliburton's U.S. operations last year, but the company projects a modest increase in rigs nationwide this year. A combination of high oil prices and increasingly efficient drilling should drive energy companies to keep investing in new production — creating business for Halliburton, which sees North American operating profit margins rising near 20% this year from about 16% last year. In the longer term, recent signs of an easing of the ban on U.S. exports of crude oil bode well for oilfield services providers.

You can acquire an annual report for Halliburton Co. at 3000 N. Sam Houston Parkway East, Houston, TX 77032, (281) 871-2699, www.halliburton.com.

HALLIBURTON
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Mar '14
0.73
vs.
0.68
5%
59.99
-
47.60
19 - 15
Dec '13
0.93
vs.
0.83
5%
56.52
-
47.99
18 - 16
Sep '13
0.83
vs.
0.73
5%
50.50
-
41.86
17 - 14
Jun '13
0.73
vs.
0.67
1%
45.75
-
36.77
16 - 13
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2013
29.40
3.15
0.53
56.52
-
35.07
18 - 11
2012
28.50
3.00
0.36
39.19
-
26.28
13 - 9
2011
24.83
3.26
0.36
57.77
-
27.21
18 - 8
2010
17.97
1.97
0.36
41.73
-
21.10
21 - 11
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
93
80
57
87
63
85
94

   * Earnings exclude special items.
   † Quadrix® scores are percentile ranks, with 100 the best.


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