Halliburton May Be The Preeminent Way to Play A North American Recovery

3Q Review

Analyst Sonny Randhawa termed the company's third-quarter results as solid, with earnings per share of $0.01 beating his estimate for a loss of $0.05 and the consensus loss estimate of $0.07. The analyst attributed the variance to an effective tax rate of 114 percent, resulting from tax losses in the United States, offset by taxable income in the foreign jurisdictions with lower statutory rates.

However, revenues of $3.83 billion trailed his estimate of $3.95 billion and the consensus estimate of $3.90 billion, the analyst noted.

Related Link: North America Leading Halliburton's Recovery

The analyst believes the solid performance came about due to increased utilization in North America and effective global cost and working capital management.

U.S. And International Activity

D.A. Davidson sees a disconnect between U.S. rig count and the company's North American revenues, as smaller operators, who are less service intensive, were the first to put rigs back to work. The firm expects service intensity to rise notably in the coming quarters as large operators bump up their capex in 2017. That said, the firm remains cautious concerning the fourth quarter due to holiday and seasonal weather-related down-times.

On international activity, the firm noted that the Eastern hemisphere overcame the revenue softness by cost management. In Latin America, D.A. Davidson noted weakness in revenues and operating income, dragged by restricted customer budgets, delayed projects and historically low rig counts. The company expects sequentially flat performance in the fourth quarter, as minimal year-end sales and customer pricing pressure weigh down, the firm said.

Seeking Answers From Call

• Outlook for North American revenue and margin recovery.
• Competitive dynamic of pressure pumping market.
• International activity and revenues in 2017.
• Commodity prices and customer capex budget adjustments for 2017.

Reiterating Rating, Price Target

The firm reiterated its Buy rating and $57 price target on the shares of the company.

At the time of writing, shares of Halliburton were down 0.24 percent at $48.95.

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