On April 22, Halliburton (HAL) gained 5% and it was one of the top performing stocks in the energy sector after the company crushed Wall Street's expectations. The company reported a record breaking first quarter revenue of $7 billion on Monday. The stock appears to be undervalued and it is an attractive long-term investment.
The stock has strong fundamentals. The TTM P/E ratio for Halliburton is near 14. Halliburton's P/E ratio is substantially lower than the industry average P/E ratio of 18. National Oilwell Varco (NOV) has a P/E ratio of 11.16, Schlumberger's (SLB) P/E ratio currently stands at 17.48, and Baker Hughes (BHI) has a P/E ratio of 16.03. The forward P/E ratio for Halliburton is 10.08. The stock's PEG ratio is .73, which could indicate that the stock is undervalued. The stock's dividend yield of 1.3% is slightly below the industry average of 1.5%. The current ratio is 2.75, which could indicate that the company is financially healthy. Free cash flow is also at 5-year highs, as shown in the graph below.
Q1 2013 Results
The company's revenues and operating income were significantly higher than the previous year and the company outgrew its primary competitors. The company's North American margins improved substantially. The news from North America was very good. Cost saving programs in the North American region finally began to materialize during Q1. The U.S. land rig count averaged 3% lower in Q1, but the company expects to see higher service intensity in the future. The company believes that the oil rig count will continue to grow at a moderate pace from current levels. Margins are expected to expand during the remainder of the year for North America. The company grew its revenues by 21% on a year-over-year basis. In addition to the company's positive news from North America, the story internationally was also upbeat. In Latin America, the company received approval from Petrobas for new contracts. The company grew its revenues by 21% on a year-over-year basis in Latin America. Also, the company will maintain the same growth strategy going forward.
This stock and other energy stocks will likely be held down by low oil prices in the near future. The company announced in Q1 conference call that an uptick in natural gas prices hasn't changed the company's outlook for gas activity. The company will need to see sustained price movements before gas activity will meaningfully increase. Halliburton is far ahead of its competition. 2013 is set to be a great year for the company due to improving margins and great growth rates.
Halliburton reported a record Q1 and the news from the company was upbeat. The company is crushing its competition, yet it appears to be cheaper than its rivals. The news from North America was positive and international regions such as the Middle East continue to grow very rapidly. Halliburton is an attractive long-term investment due to these factors.