For long-term investors out there, it's hard to forget that brief period back in April when the seemingly-impossible happened and oil prices went negative. Yes, for a while there, the price of oil wasn't merely free, but rather, businesses had to pay to store it. Fleets of tankers parked off coastlines, waiting to drop off their cargo, and the world witnessed conditions that no one thought would ever occur. Such conditions weighed heavily on producers, and Halliburton (NYSE:HAL) is still recovering to this day.
A Mixed Bag Picture Puts the Stock in a Slump
It wasn't all bad news for Halliburton. The company managed to beat Wall Street estimates on earnings, posting adjusted earnings of $100 million, or $0.11 per share. The Wall Street consensus was looking for $0.08 per share. Additionally, the company still has positive cash flow, with operations posting $420 million and free cash flow sitting at $265 million.
Really, the bad news is about what would be expected given the overall economic environment we've been seeing for the last quarter. The company posted a loss of $17 million in the third quarter, which is light years down from the same time last year, in which it brought in $295 million.
Earnings per share, not surprisingly, also posted losses of $0.02 per share, which again compares terribly against last year's $0.34. Gross sales were also down against expectations, as the company also managed to bring in $2.97 billion in sales, again down substantially from this time last year, when the company posted $5.5 billion in sales.
The Analysts Find Recovery Less Than Likely
Our latest research puts together a stark picture of Halliburton's recovery chances, and by extension, the oil market's chances. In the last 30 days, Halliburton added a new analyst's coverage, as Exane BNP Paribas stepped in back on the 12th. The problem is they stepped in with a rating of “underperform,” or effectively, “sell.” This brought the overall analyst picture to two “sell” ratings, 18 “hold” ratings, six “buy”, and two “strong buy.” The combined picture provides an overall “hold” rating.
Worse, the price target has been slowly slipping for the last six months. Back in the very earliest days of the pandemic, 180 days ago, the company had a price target of $15.26 per share. Now, it sits at $13.14 per share, having fallen 90 days ago to $13.43 and briefly recovered a month ago to $13.63.
Fighting the Tide
While Halliburton has only so much impact on oil demand and the vagaries of the oil market, it's clear that the company isn't taking its slump lying down. Word from the CEO suggests that the company's recent move to deliver on “strategic priorities” has been going well, assuming one of its “strategic priorities” involved firing 15,000 people.
Given that the company posted losses of $2.97 billion back in the half-year results the company posted back in June, though, the company's moves may indeed have borne fruit. The combination of recovering demand—just look at the price of a barrel of oil right now—and slimmer operations is giving Halliburton a chance to recover. Indeed, Halliburton also looks for a comeback in the US shale oil market to kick up before too much longer.
Betting on an Uncertain Picture
The picture ahead is still pretty uncertain for Halliburton, and for the whole oil market by extension. While the chance of large-scale lockdowns in the United States making a comeback is a bit unlikely—the political will to maintain such is lacking and the disastrous impact to the economic picture is now established fact—there's enough room for individual choice to hurt the oil demand.
For instance, movie theaters have been reopening steadily over the last few months, but with virtually no new content and a great deal of concern from moviegoers, the end result is almost the same as if they had remained closed. The ongoing work-from-home movement is maintaining a serious drag on oil as well, as as many people as possible continue to work out of their homes instead of making the daily round trip to and from work.
Throw in the vagaries of the upcoming election—despite frequent disputations, Joe Biden remains on video saying he will at least hinder fracking in the US, which will do horrendous things to the US shale oil industry—and it's easy to see that Halliburton's picture is uncertain going forward. However, given the price of Halliburton shares right now, and the previously-seen recovery, betting on Halliburton isn't a long-odds play by any stretch of the imagination. At least, for now.
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