Following the company’s second-quarter earnings call, Bank of America maintained its bullish stance on Halliburton Company HAL.
The Halliburton Analyst: Chase Mulvehill maintained a Buy rating on Halliburton with a $33 price target.
The Halliburton Takeaways: Halliburton posted beats to consensus and Bank of America expectations on second-quarter 2021 EPS, EBITDA and EBITDA margins, Mulvehill said in a note.
The margin beat was especially positive given the company’s reported revenue for the quarter missed expectations, the analyst said.
This EBITDA beat and revenue miss lead to the conclusion that cost inflation has not yet impacted the company, he said.
U.S. horizontal rig activity could grow by upwards of 40% through the end of 2022, while the recent OPEC production expansion could detract from international upside, said Mulvehill.
The analyst expects the company to forecast 5%-7% and 6%-8% quarter-over-quarter revenue growth in the third and fourth quarters, respectively, with his estimates coming in slightly above consensus estimates, according to data in the report.
Mulvehill arrived at the $33 price target using a DCF valuation rather than a peer-based EV/EBITDA multiple approach.
The DCF used a 6.8% WACC and forecasted a 10-year outlook, after which Mulvehill forecast a terminal growth rate of negative 3% due to longer-term transitions to cleaner energy sources.
HAL Price Action: Halliburton shares gained 3.67% Tuesday, closing at $20.07.
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