Halliburton Company (HAL)’s Improved, but Plenty of Work Left to Do

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For a company whose main source of revenue is based on its ability to drill, there were doubts over whether Halliburton Company (NYSE:HAL) could ever find a bottom. However, the topic was not oil; it was the stock, which had been in a freefall until finding a floor at $26 per share.

However, things suddenly changed over the past two months as shares soared 30%. Even though the stock was still trading at a P/E 5 points below rival Schlumberger Limited. (NYSE:SLB), I had my doubts over whether this level of optimism was deserved. But with the release of its Q4 results, Halliburton answered.

Halliburton Company (NYSE:HAL)Revenue was light but outpaced rivals
The nature of the energy sector causes quite a bit of confusion, especially when it comes to comparing strengths and weaknesses. Plus, these names are not always competing for the same markets, nor do they ever apply the same level of effort and resources toward securing revenue. So keeping things in the proper context makes thing clear.

As noted, Halliburton’s stock suffered a brutal punishment last year. But relative to expectations, the company, in fact, did pretty well, especially when compared with the performance from Baker Hughes Incorporated (NYSE:BHI). Nonetheless, the Street demanded improvements. Analysts were looking for earnings of $0.61 per share on revenue of $7.06 billion. This meant that analysts were anticipating flat sales with almost a 40% decline in earnings per share.

These estimates remained unchanged, even though Schlumberger posted a 5% sequential revenue growth the week prior in its Q4 results. Nonetheless, despite the pessimism, Halliburton delivered earnings of $0.67 per share on revenue of $7.3 billion — enough to beat on both top- and bottom-line projections. Plus, this was the company’s highest quarterly revenue performance in its history.

The record results notwithstanding, growth of only 2.5% year over year was nothing to write home about. And despite the beat, Halliburton still has a way to go to supplant Schlumberger’s 8% growth. But then again, Schlumberger has consistently outperformed this sector over the past five years, while doubling revenue from $6 million to more than $13 million. Essentially, its Q4 performance was expected.

However, it’s encouraging for investors that Halliburton is doing better than just holding its own. Besides, when comparing the performances of both companies, Schlumberger didn’t significantly outperform below the top line. Operating income grew 1% sequentially, while arriving flat year over year. Likewise, income from continuing operations was a little soft at $1.44 billion, arriving flat sequentially, and declined 3% year over year.

This means that amid an equally sluggish environment, Halliburton’s 2.5% growth kept pace with the market’s leader, while it widened the gap between itself and Baker Hughes.

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