Halliburton Stock: Best-in-Class After Earnings Beat (HAL)

Halliburton (HAL) stock is surging higher on Tuesday, thanks partially to higher oil prices. But it sure didn’t hurt that Halliburton crushed earnings estimates yesterday; similarly strong quarters from oil services peers Baker Hughes (BHI) and Schlumberger (SLB) helped bolster shares as well.

halliburton-hal-stock-185To say that HAL, BHI, and SLB had strong quarters is relative, of course. Compared to the same quarter a year ago, results were horrendous. At Halliburton, revenue fell 26% to $5.92 billion and net income fell a whopping 93% to $54 million.

Excluding restructuring costs and charges related to its high-profile Baker Hughes acquisition, earnings per share clocked in at 44 cents vs. 49 cents in the year-ago quarter. All this sounds pretty bleak on the face of it. But both revenue and EPS beat consensus estimates of $5.78 billion and 29 cents, respectively.

All in all, Halliburton’s quarterly earnings beat merely reinforced the fact that HAL stock is still a best-in-class buy when it comes to the oil services field.

A Value Buy in an Uncertain Biz

As I mentioned previously, HAL wasn’t the only one to have a good quarter (again, relatively speaking). BHI matched EPS estimates (losing 14 cents per share) and beat on revenue, while SLB breezed by earnings estimates but narrowly missed on revenues.

All three of the companies are trimming costs aggressively to keep pace with the market, which is suffering through a global supply glut. With Iran back online as sanctions ease, energy prices could remain pressured for some time, especially with winter — and the lower seasonal prices it can bring — coming.

Up 6% this year, HAL stock still offers value. Shares trade at 16 times earnings, less than half the valuation of BHI, and a healthy discount to SLB’s 22 P/E.

The proposed acquisition of Baker Hughes should further solidify HAL as the stock to buy in the industry … that is, if the deal goes through. The $35 billion purchase would combine the No. 2 and No. 3 players in the space, forming a company with a combined market cap of $60 billion as it stands today.

SLB remains a behemoth — it’s worth more than $100 billion — so the Federal Trade Commission allowing a $60 billion mega-company shouldn’t be too outrageous an ask.

Listen, let’s just be honest: Nobody knows what’s coming next in this industry. But don’t take my word for it; HAL CEO Dave Lesar said so himself during a conference call on Monday:

“…this is a damn tough market, one of the toughest ones that I’ve ever been through. And I don’t believe anyone on the call can accurately predict when commodity prices will rebound and rig counts will recover in the U.S. or the international markets, and neither can I.”

There’s a caveat, of course. A delicious nougat of a caveat (for HAL stock bulls):

“What I do believe is that when the recovery occurs, North America will offer the greatest upside and that Halliburton will be the best position to lead the way.”

Betting on North America has been a pretty strong strategy in the past, and if you’re a believer in the long-term potential of the U.S. energy markets, HAL stock is one strong way to play it.

As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/07/halliburton-stock-best-in-class-after-earnings-beat-hal/.

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