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Halliburton Company HAL is set to release first-quarter results on April 22. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at a profit of 60 cents per share on revenues of $5.3 billion.
Let’s delve into the factors that might have influenced the oilfield service firm’s performance in the March quarter. But it’s worth taking a look at HAL’s previous-quarter performance first.
Highlights of Q4 Earnings & Surprise History
In the last reported quarter, this Houston, TX-based provider of technical products and services to drillers of oil and gas wells, met the consensus mark. The numbers reflect softer activity in the North American region, partly offset by improved fluid work in the Gulf of Mexico. Halliburton reported adjusted net income per share of 70 cents, in line with the Zacks Consensus Estimate of 75 cents. However, revenues of $5.6 billion missed the Zacks Consensus Estimate by $31 million.
HAL beat the Zacks Consensus Estimate once in the last four quarters, met in two and missed in the other. This is depicted in the graph below:
Halliburton Company Price and EPS Surprise
Halliburton Company price-eps-surprise | Halliburton Company Quote
Trend in Estimate Revision
The Zacks Consensus Estimate for the third-quarter bottom line has remained unchanged in the past seven days. The estimated figure indicates a 21.1% drop year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 9.4% decrease from the year-ago period.
Factors to Consider
After bouncing back strongly from the depths of the pandemic, the oil and natural gas rig count in the United States has gradually declined over the past year. Consequently, drilling activity — an important factor for services companies — has hit a speed bump. In the United States, a region on which Halliburton is highly dependent, the rig count has decreased by around 6% from a year ago. The steady decline in rig count is worrying for contracting activity
Consequently, our expectation for first-quarter revenues for the North American region is pegged at $2.4 billion, indicating a 4.6% decline from the year-ago quarter due to declining frac spread counts and muted demand. This is likely to have undermined the company’s earnings and cash flows.
Halliburton's operating margins, particularly in its Completion and Production segment, are expected to have contracted too. Going by our model, the company’s first-quarter segment margin is likely to come at 17.8%, down from 20.4% in the year-ago period due to slowing North American activity.
But giving some respite to the company, its pivot to digitalization and integrated services is gaining traction. Platforms like DecisionSpace 365 and its turnkey project management model offer customers end-to-end solutions, boosting efficiency and reducing coordination costs. Halliburton acts as a single service provider instead of just a contractor, which not only deepens client relationships but also ensures more stable and recurring revenues.