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Halliburton Company HAL hit a 52-week low of $25.16 on Friday, extending its year-long decline to nearly 21%. The stock has significantly underperformed both the Zacks Oil and Gas Field Services industry, which gained 9.9%, and its peer SLB SLB, which fell 10% over the same period. The reason? Halliburton’s heavy exposure to North America, a region facing pricing pressure and weaker drilling activity.
HAL, SLB 1-Year Stock Performance
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Unlike SLB and Baker Hughes BKR, which generate only 20-25% of their revenues from North America, Halliburton relies on the region for over 40% of its business, making it more vulnerable to regional slowdowns.
Adding to investor concerns, the Zacks Oil & Gas Field Services industry ranks in the bottom 17% of all industries, signaling further underperformance ahead. Analysts have taken note of the weakness — over the past 30 days, the Zacks Consensus Estimate for Halliburton’s 2025 EPS has dropped 10%, from $2.97 to $2.67. Given these challenges, let’s break down why Halliburton stock may not be the best bet right now.
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North America Headwinds Pressure Revenue Growth
Halliburton’s North American revenues fell 8% year over year in 2024, and management expects another low- to mid-single-digit decline in 2025. A significant factor behind this is lower negotiated pricing for its pressure pumping services. The company remains fully contracted, but with weaker pricing across parts of its fleet, the first quarter of 2025 will bear most of the margin impact.
Additionally, the U.S. rig count continues to trend downward, with completion activity slowing and oil demand growth showing signs of weakness. While Halliburton is expanding in artificial lift and completion tools, these segments are not enough to offset the broader downturn in North America. Investors should brace for continued pressure on Halliburton’s top-line performance in the coming quarters.
Margin Compression Amid Weaker Demand
Profitability is taking a hit as well. In the December quarter, Halliburton’s Completion & Production operating margin was 20%, but management has guided for a sequential decline of 1.75-2.25% in the January-March period. Meanwhile, Drilling & Evaluation margins could fall by another 0.5%. This signals growing challenges in maintaining profitability, particularly in the face of weaker pricing power.
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The impact of margin contraction is evident in Q4 results. Completion & Production revenues fell 4% sequentially, with operating margins declining by 49 basis points due to weaker North American stimulation activity. At the same time, Halliburton’s Drilling & Evaluation segment saw margins slip by 44 basis points, reflecting increased competition and cost pressures.
With rising tax expenses (expected to increase by 300 basis points to 25.5% in 2025) and higher interest costs, Halliburton’s ability to maintain its strong margins is under threat. This could weigh heavily on earnings, making the stock less attractive despite its seemingly low valuation.