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Where Does Halliburton Stand after Its 2Q15 Earnings Release?

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Halliburton’s 2Q15 revenues

Halliburton (HAL) released its 2Q15 financial results on July 20. In this series, we’ll discuss where Halliburton stands after its 2Q15 earnings announcement. First up is a snapshot of Halliburton’s 2Q15 revenues and earnings. The company recorded total revenues of $5.92 billion for 2Q15, down 26.5% from the $8.05 billion recorded in 2Q14. Halliburton’s revenues for the latest quarter decreased mostly due to a slowdown in its North American operations. North America has been declining since 1Q15, when the US rig count decline started to accelerate.

Adjusted operating income decreased 46%, to $643 million in 2Q15 from $1.19 billion recorded in 2Q14. Operating income doesn’t include impairments and other charges, like the Baker Hughes (BHI) acquisition-related costs.

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Earnings in 2Q15 versus 2Q14 and 1Q15

Halliburton recorded $54 million in net income in 2Q15 versus $774 million in net income in 2Q14. That’s a 93% decline in a year. Geography-wise, operating earnings decreased mostly in the company’s North American operations from 2Q14 to 2Q15. Product-wise, the Completion & Production segment suffered the most. The net income margin slumped to ~1% in 2Q15 from 9.6% a year earlier. The net income margin is the net income attributable to HAL shareholders divided by the total revenues for the quarter.

Compared to 1Q15, Halliburton’s earnings improved sequentially. In 1Q15, they recorded a $643 million net loss, resulting primarily from $1.2 billion in pre-tax impairment charges related to asset write-offs, inventory write-downs, impairments of intangible assets, severance costs, and other charges. In comparison, in 2Q15, the company recorded a much lower $306 million pre-tax impairment charge. Halliburton also recorded $83 million in Baker Hughes acquisition–related costs in 2Q15.

Halliburton’s 2Q15 earnings per share (diluted) decreased to $0.06 from the $0.91 recorded in the second quarter of 2014.

Halliburton is 13.2% of the VanEck Vectors Oil Services ETF (OIH) and 3% of the Energy Select Sector SPDR ETF (XLE). Baker Hughes (BHI), which Halliburton has agreed to buy, recorded a 33% decline in its adjusted revenues in 2Q15 over 2Q14 while FMC Technologies (FTI) recorded 14.6% decline in the same period.

In the next part of this series, we’ll discuss Halliburton’s earnings versus estimates.

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