Despite a boom in oil and gas activity in the onshore U.S., Halliburton Company (NYSE:HAL) did not report particularly strong results in the first quarter of 2013. Despite the fact that overall revenue increased somewhat versus a year earlier, costs rose considerably and as a result after adding back the company’s loss contingencies we get that pretax income decreased by over 30%. Cash flow from operations did even worse, being half of what they were in Q1 2012 (and less than what Hallliburton used on capital expenditures, though it does have a sufficient cash base for now).
Wall Street analysts are expecting adjusted earnings per share figures of $3.19 for this year, which results in a current-year P/E multiple of 14. While we’ve mentioned Halliburton’s recent struggles, that could make for a reasonable valuation in our view given the business’s opportunities in oilfield services- it would be surprising if results didn’t improve slightly from this point. The sell-side then projects improvements in EPS for 2014 and beyond, implying a forward earnings multiple of 11 and a five-year PEG ratio of 0.8. We would note that Halliburton Company (NYSE:HAL) does have a beta of 1.9; this makes sense, as oil prices are tied to the overall economy and oil companies are more likely to drill (generating demand for Halliburton’s services both immediately and over the course of the production lifecycle) when prices are high.
As part of our work researching investment strategies, we track quarterly 13F filings from hundreds of hedge funds and other notable investors; we’ve found that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy) and think that more techniques are possible as well. We can see from our database that billionaire Leon Cooperman’s Omega Advisors had just over 4 million shares of Halliburton Company (NYSE:HAL) in its portfolio as of the end of March (see Cooperman’s stock picks) while Citadel Investment Group, managed by billionaire Ken Griffin, reported a position of 2.4 million shares (find Griffin’s favorite stocks).