Halliburton versus peers and industry
As of March 11, 2016, Halliburton (HAL), the second-largest OFS (oilfield equipment and service) provider by market capitalization, has had a fair run on the stock market. However, the long-pending acquisition of Baker Hughes (BHI) has been a drag on its price. On March 11, HAL was trading at $34.12. This was ~13% lower than its price a year ago. Baker Hughes’ (BHI) share price decreased 36% in a year, while Precision Drilling Corporation’s (PDS) share price declined 22% during the same period.
The VanEck Vectors Oil Services ETF (OIH), an ETF tracking index of 25 OFS companies, has declined by 17% in the past one year. By comparison, RPC (RES), HAL’s smaller market cap peer, has increased by 14% during the same period. The WTI (West Texas Intermediate) crude oil price has declined by 20% during this period. HAL makes up 12% of OIH.
What Halliburton’s share price movement tells us
Halliburton’s share price has trended down since early May 2015. HAL’s quarterly revenues and net income in the past four quarters persistently have stayed weak, while its cash flow improved in fiscal 4Q15 over the previous quarter. Since the third week of January, when HAL’s share price reached a one-year low, it has recovered 21%.
Moving averages exhibit a smoother trend following the stock’s price movement. A 50-day MA (moving average) is a short-term MA while a 200-day MA shows a long-term trend. On March 11, Halliburton’s shares were trading at 13% premium to the stock’s 50-day MA, and it was trading 4.2% below its 200-day MA.
HAL’s short-run MA has stayed below its long-run MA in the past year. HAL’s share price has gone above it short-run MA in February and is staying closer to its long-run MA. This indicates that HAL’s share price is gathering some momentum. The company’s recent run could also reflect market’s expectation of a definitive decision by regulators on the pending Baker Hughes acquisition.
In this series, we’ll analyze Halliburton’s top-line and bottom-line growth, it’s the balance sheet, free cash flow, dividend, and valuation multiples. Let’s start with the latest comments from Halliburton’s management.