Energy-market traders will be watching closely as oil and natural gas giant Halliburton (NYSE:HAL) reports its second-quarter earnings data on July 20. Expect the implied volatility on HAL stock to ramp up over the coming days as this is a hotly anticipated earnings announcement.
If you’re looking for absolute perfection in an energy-sector company now, Halliburton will assuredly disappoint you. Halliburton, like virtually all firms in the petroleum products and services market, was negatively impacted by the falling oil price in 2020’s first half.
As a result, the company’s known data isn’t all rosy and, in all likelihood, Halliburton’s not-yet-known second-quarter fiscal data will indicate some unresolved issues.
The unfavorable data must be addressed, and we will certainly do that, but in the process, we might actually find a reason to take a chance on HAL stock.
A Closer Look at HAL Stock
The negative impact of the novel-coronavirus pandemic could easily be discerned in the HAL stock price this year. Jan. 6 marked a short-term peak of $25 and change. By Feb. 9, the share price had already started drifting lower towards the $22 area.
Then the bottom fell out of the stock market, taking the HAL stock price with it. In mid-March, the share price tumbled all the way down to a mind-melting $4.25. It was a painful decline from the 52-week high of $25.47.
By July 10 HAL stock, at around $12, had recovered some of those losses. On the other hand, both the stock price and the daily trading volume appeared to be drifting lower for at least a month. The bulls are undoubtedly hoping that the upcoming earnings report will provide a much-needed positive catalyst.
Uncertain about Halliburton
Some traders might be unsure about Halliburton, and some of the data does indeed support a bearish position. For example, HAL stock’s trailing 12-month price-earnings ratio of -2.62 is a cause for concern.
The stock also presents a five-year monthly beta of 2.57. This suggests that HAL is too hot to handle for risk-averse investors because the stock tends to move quickly and sharply.
What about income-focused investors who have enjoyed Halliburton’s generous dividend payouts for years? Not long ago, the company opted to slash its quarterly dividend from 18 cents to 4.5 cents.
That’s a stomach-turning dividend cut of 75%. So, income-oriented investors probably aren’t too pleased with Halliburton at the moment.
If the foregoing points are deal breakers for you, then that’s perfectly understandable. Particularly risk-intolerant investors might choose to just avoid HAL stock until conditions change. At the same time, if dividends are your primary focus, it’s OK to put HAL on the back burner for the time being.
Reasons to Like Halliburton
Can a bull case be constructed for Halliburton, then? Sure, if you’re willing to focus on certain data points. For instance, the company has taken measures to reduce its expenditures. These measures include a voluntary 20% reduction in annual pay for Halliburton’s board.
Furthermore, Halliburton has reduced its capital expenditures for 2020 by almost 50% in comparison the expenditures of last year. Additionally, Halliburton has commenced a $1 billion action plan designed to reduce the company’s overhead as well as other expenses.
Plus, as we look ahead to the upcoming earnings release, it’s worth noting that Halliburton’s first-quarter financial data was actually quite encouraging. InvestorPlace contributor Nick Clarkson provides the must-know stats:
“[Halliburton’s] reported revenue of $5.04 billion slightly beat Wall Street’s estimate of $5.01 billion. Also, the company’s adjusted earnings per share (EPS) of 31 cents beat analysts’ expectations of 24 cents for the quarter.”
That’s not too shabby and, all things considered, suggests that Halliburton might not be in such poor fiscal shape after all.
The Bottom Line
Coming into earnings, Halliburton presents an admittedly mixed financial profile. To be frank, not everyone should invest in HAL stock now. If you’re looking for reasons to make a pre-earnings bet on HAL, though, you can certainly find some.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
