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Halliburton Beat 1Q18 Earnings Estimates: Here’s Why

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Nov. 20 2020, Updated 2:40 p.m. ET

Halliburton’s 1Q18 revenue

Halliburton (HAL) released its 1Q18 financial results today. The company recorded total revenues of $5.74 billion in 1Q18, up ~34% from the $4.28 billion recorded in 1Q17. Halliburton’s revenues for 1Q18 rose mostly due to increased US onshore exploration and drilling activity, higher well completion activity in Europe, Africa, and CIS (the Commonwealth of Independent States), and higher stimulation activity in the Middle East.

Compared to 4Q17, Halliburton’s revenues decreased 3.4%. The 1Q18 revenue for Schlumberger (SLB), HAL’s larger-market-cap peer, declined 4.3% quarter-over-quarter. Read more about SLB’s 1Q18 earnings in Market Realist’s Schlumberger Reports 1Q18 Earnings, Beats Estimates.

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Halliburton’s 1Q18 earnings

The 1Q18 adjusted earnings per share for Halliburton were $0.41, which marginally beat consensus sell-side analysts’ earnings estimate of $0.406 by 1%. The robust 1Q18 operating margin in both the Completion and Production segment and the Drilling and Evaluation segment versus 1Q17 helped HAL’s earnings exceed analysts’ estimates.

Compared to 1Q17 adjusted earnings of $0.04, HAL’s 1Q18 earnings improvement was remarkable. However, compared to 4Q17, adjusted earnings dropped 23%, based on weaker operating income in the Drilling and Evaluation segment and muted performance in some of HAL’s international operations. Weather-related rail disruptions and delays in sand delivery weighed on HAL’s operating costs in 1Q18.

On average, adjusted EPS have exceeded consensus EPS by ~30% in the past 13 quarters. Halliburton is 15.1% of the VanEck Vectors Oil Services ETF (OIH), an ETF tracking an index of 25 oilfield services and equipment companies. In the past year, OIH decreased 6% versus a 10% increase in HAL’s stock price.

What affected Halliburton’s 1Q18 reported earnings?

In 1Q18, HAL’s reported net income was $46 million, which was a turnaround compared to 1Q17, when HAL reported a $32 million net loss. HAL’s 1Q18 earnings were also a steep improvement over 4Q17, when Halliburton’s net loss was $824 million. In 1Q18, HAL’s earnings were negatively affected by $265 million in charges related to an investment write-off in Venezuela, following the economic and political situation in Venezuela. In 4Q17, HAL recorded $882 million discrete tax charges primarily related to tax reform.

In comparison, in 1Q18, Baker Hughes, a GE Company (BHGE), recorded ~$70 million in net income. Baker Hughes’s 1Q18 net income was negatively affected by various one-time charges, including restructuring charges, impairments, and merger and related costs.

Learn more about the OFS industry in Market Realist’s The Oilfield Equipment and Services Industry: A Primer.

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