Halliburton Working To Gain A Sustainable Competitive Advantage

D.A. Davidson expects Halliburton Company HAL’s third-quarter results to come in above consensus, driven by the recovery in the North American rig count and continued market share gains during the downturn.

The company is expected to report its third-quarter financial performance on Wednesday. The brokerage expects revenue/EBITDA/EPS of $3.95 billion/$486 million/$(0.05) versus consensus of $3.90 billion/$469 million/$(0.07).

“Although, it may take a few more quarters for larger operators (HAL’s core customer base) to adjust capex budgets and increase activity, a slight miss would only add to the trajectory of future earnings,” analyst Sonny Randhawa wrote in a note.

Randhawa, who has a Buy rating on the stock, expects a significant uptick in the service level intensity “as larger operators gain comfort with the recovery in commodity prices and adjust 2017 capex budgets higher.”

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The analyst pointed out Halliburton’s strong share in the pressure pumping market and expects the company to add further gains despite an increase in frac intensity.

“We believe HAL’s sizable sand logistics operation and buying power puts them at a considerable advantage when negotiating sand pricing vs. smaller peers,” Randhawa continued.

As such, Randhawa raised his 2016/2017/2018 EPS estimates to $(0.16)/$0.83/$2.35 from $(0.21)/$0.80/$2.18. The analyst also increased his target price to $57 from $54 based on a 12x EV/EBITDA multiple applied to his 2018 EBITDA estimate of $4.8 billion.

At time of writing, shares of Halliburton rose 1.68 percent to $47.10.

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