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A Halliburton facility in Port Fourchon, Louisiana

Mira Oberman/AFP via Getty Images


is one of the few oil and gas stocks that hasn’t soared this year, but that could be changing after the company reported better-than-expected earnings on Tuesday and is starting to become an analyst favorite. 

Halliburton’s (ticker: HAL) revenue slightly missed expectations in the quarter, but earnings per share of 26 cents beat the consensus analyst estimate of 23 cents, and guidance was promising. Halliburton’s 2023 revenue projection was 9% above Wall Street’s estimates and one of its adjusted earnings projections also surprised analysts, noted Coker Palmer analyst Vaibhav Vaishnav. Shares were rising 5% in midday trading. Before Tuesday, it was up only 3% this year, even as oil and gas producers have risen about 50% on average.

Like producers, Halliburton is vulnerable to commodity-price slumps, but its problems go deeper, too. The era of “drill baby drill” is over in the U.S., and that is particularly difficult for Halliburton, the leader in oilfield services for U.S. shale drilling. Shale-oil producers have been tightening their capital-expense budgets because investors will no longer put up with unprofitable drilling. Halliburton has made substantial cuts to prepare for the new world, and its balance sheet has improved, but it still needs drilling to rebound to rise more. In the near term, Halliburton CEO
Jeff Miller
said private oil drillers are increasing activity but public companies are “going to do exactly what they’ve said they’re going to do.”

That said, the company pointed to a “multiyear upcycle” ahead. And cost-cuts mean that Halliburton could climb back to its past levels of profitability. The company expects operating margins to return to 2014 levels by 2023. CFRA analyst Andrzej Tomczyk upgraded shares to Buy after the earnings report, citing the probability that Halliburton can raise prices by the end of the year as demand improves. Bank of America analyst Chase Mulvehill also recently upgraded Halliburton to Buy.

But not everyone is convinced.

“We think Halliburton has solid reasoning and detailed work behind the 2023 guide but the oilfield-services industry track record has not been strong with cycles having starts and stops,” Vaishnav wrote. “We won’t chase the stock here.” He rates Halliburton stock at Sector Perform.

Write to Avi Salzman at avi.salzman@barrons.com

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