Will earnings unstick Halliburton’s share price?

Halliburton’s [HAL] share price has had a disastrous year so far, having sat below the value at which it opened 2020 since the second week of January. Looking ahead, could the company’s third quarter earnings, due 19 October, give Halliburton’s share price a much-needed lift? 

Halliburton’s share price took a big hit on 18 March and at $4.58, which represents an 81% year-to-date decline and the stock’s lowest value since 2002. 

A few months later, it looked as though Halliburton’s share price was on the road to recovery when it surged 24.34% over a two-day trading period, closing at $16.35 on 8 June. This still left the stock 32.04% lower than its 2020 opening price, but even this value failed to stick and Halliburton’s share price soon fell again, closing at $12.25 on 11 June. 

Nearly two months later, Halliburton’s share price staged another comeback, this time reaching an intraday high of $16.82 on 12 August, before closing at $16.66 — the stock’s highest value since the slump in March. 

More recently, however, Halliburton’s share price fell on 1 October to a closing price of $11.17 — its lowest price since mid-May. It has since risen slightly to $12.25 on 16 October — a 49% year-to-date drop.

How has Halliburton been performing? 

When Halliburton released its second quarter earnings on 20 July, it reported earnings of $0.05 per share, considerably beating the Zacks consensus which predicted a loss of $0.11 per share. 

Despite this result, the bottom line slipped 85.7% from the same period the previous year when it reported earnings of $0.35 per share.

Revenues, on the other hand, fell 45.8% from the same quarter the previous year to $3.2bn, missing the Zacks consensus estimate of $3.26bn by 1.88%. 

Jeff Miller, president and CEO of Halliburton, remained positive in light of earnings. “Halliburton’s second-quarter performance in a tough market shows we can execute quickly and aggressively to deliver solid financial results and free cash flow despite a severe drop in global activity,” he said.

“Our results demonstrate a significant and sustainable reset to the power of our business to generate positive earnings and free cash flow,” Miller added.

Looking ahead to the next earnings release, Zacks expect the fracking company to post quarterly earnings of $0.08 per share, which would represent a loss of 76.5% year-over-year.

Revenues are expected to be $3.09bn, 44.3% lower than the same quarter a year ago. 

“With the coronavirus pandemic resulting in scaled-back business operations and reduced consumer travel, oil consumption has slumped, and that's impacted drilling and production demand and dampened Halliburton's outlook,” said Keith Noonan, writing for The Motley Fool. 

“Honing in on stocks that have recently suffered dramatic sell-offs can be a path to big gains, but that's typically only true if the underlying businesses are sturdy enough to overcome the pressures that are driving their stock declines. [...] Comeback bets should be selected carefully -- and that's particularly true amid a weakened economy and volatile market conditions,” concluded Noonan. 

Is Halliburton a Buy? 

Nick Konstantakis, analyst with Exane BNP Paribas, initiated coverage of Halliburton with an Underperform rating and $11.50 price target, according to The Fly. 

The consensus among 32 analysts polled by CNN Money is to hold the stock. This rating is held by a majority of 19 analysts, with nine suggesting to buy the stock, two giving it an Outperform rating and another two giving it a Sell rating.

The 29 analysts tracking Halliburton’s share price on CNN Money have an average target of $14.75, with a high estimate of $22.50 and a low of $10. The median price represents a 20.4% increase from Halliburton’s share price as of 16 October’s close.