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Energy Major's Domestic Revenue Likely Lower Q1/19; Will Turn Around in Q2/19

Streetwise Reports, Streetwise Reports
0 Comments| April 5, 2019

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Raymond James detailed what it expects for two of the company's business segments, domestically and internationally, in these two quarters and beyond.

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In an April 1 research note, analyst Praveen Narra reported that Raymond James lowered its Q1/19 domestic estimates for Halliburton Co. (HAL:NYSE), primarily reflecting weather and seasonal influences, and raised its international forecasts due to expected increased activity.

In the United States, "Halliburton's Q1/19 likely represents the trough of this cycle" and the "bottom for earnings per share and EBITDA," Narra noted. Accordingly, Raymond James adjusted its U.S. expectations "slightly," but those were offset by revised depreciation, depletion and amortization estimates.

Narra reviewed Raymond James' revisions to its U.S. forecasts for Halliburton. For its Completion and Production (C&P) segment in Q1/19, Raymond James lowered revenue projections by 1.3% for an 8.8% drop and a 350 basis point decrease from Q4/18. The changes were necessary due to significant snowfall in the Rocky Mountains, the Arctic freeze in the Midwest and anticipated additional price pressure. "C&P margins have likely seen the bottom if activity holds," Narra commented.

As for Halliburton's Drilling and Evaluation (D&E) business, it will likely see U.S. declines in Q1/19 revenue and margins by an estimated 9.3% and about 122 basis points, respectively. This is because decreasing the number of rig counts, which has been going on for some time, is expected to continue into Q2/19.

Looking further out, Raymond James expects a more positive scenario for Halliburton's domestic operations in Q2/19 and beyond into 2020, Narra highlighted. For Q2/19, it projects a 90 basis point quarter-over-quarter (QOQ) increase in U.S. C&P margins.

Narra briefly addressed Raymond James' outlook for Halliburton's international business in Q2/19 and full-year 2019. In Q2, the company expects a roughly 5.4% increase in C&P revenue. For all of 2019, it raised its total international revenue growth, C&P and D&E, estimate to 7.3% from 3.4%, and noted that rate should be achieved with minimal capital input.

As for free cash flow, Raymond James expects it will be "meaningful" in 2019 and 2020 due to capex reductions and the company's commitment to limiting spending.

Raymond James has a Strong Buy and a $45 per share target price on Halliburton, whose stock is currently trading at around $30.09 per share.

1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Disclosures from Raymond James, Halliburton Co., Apr. 1, 2019


Analysts Holdings and Compensation: Equity analysts and their staffs at Raymond James are compensated based on a salary and bonus system. Several factors enter into the bonus determination, including quality and performance of research product, the analyst's success in rating stocks versus an industry index, and support effectiveness to trading and the retail and institutional sales forces. Other factors may include but are not limited to: overall ratings from internal (other than investment banking) or external parties and the general productivity and revenue generated in covered stocks.

The analysts Praveen Narra and J. Marshall Adkins, primarily responsible for the preparation of this research report, attest to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers and (2) that no part of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views in this research report. In addition, said analyst(s) has not received compensation from any subject company in the last 12 months..

Certain affiliates of the RJ Group expect to receive or intend to seek compensation for investment banking services from all companies under research coverage within the next three months.

Raymond James & Associates makes a market in shares of Halliburton Company.

Additional Risk and Disclosure information, as well as more information on the Raymond James rating system and suitability categories, is available here.

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