Halliburton (HAL) recently reported its quarterly results. The company has earned $0.67 per share, above the analyst expectation of $0.57 (analyst estimates sourced from Yahoo! Finance). This result was surprising because the highest analyst estimate was $0.60 per share. The market embraced the news, and Halliburton rose 5.59% on the day of the earnings report.
Halliburton scored a record total revenue of $7.0 bln for the first quarter, up 1.5% from the first quarter of 2012. The decline in North America segment of the business was offset by international operations. The company cited that its international revenue grew by 21% compared to the first quarter of 2012.
During the earnings call, the company officials highlighted several important things. I believe they are positive for the company and may attract investors to add HAL to their portfolios.
The company is positive about international pricing. David Lesar, CEO of Halliburton, said: " If you look at where we are bidding today, and where we're winning work, I think we certainly have hit the bottom in terms of international pricing. Believe me, it's still competitive. But I believe that we're seeing that it is starting to turn up." Pricing has a significant effect on operating margin levels. Currently, HAL has a 15.64% operating margin (sourced from Yahoo! Finance). Its competitors, Schlumberger (SLB) and Baker Hughes (BHI) have operating margins of 17.74% and 9.81% accordingly.
Halliburton looks forward to continue realization of its stock repurchase program. The company plans to speed the process in the second quarter. There is $1.7 bln of stock that could be purchase. At current prices, 43.25 mln shares could be purchased. This is 4.66% of the total share float, and more than 3 times average daily volume. Of course, only a portion of this amount would be purchased in the second quarter of this year. I believe it would lift the prices to a certain extent.
HAL has recently increased its dividend. The 1.27% yield is still not very impressive. During the conference call, Mark McCollum, CFO, stated: "Going forward, our intention is for the dividend to represent at least 15% to 20% of our net income". This is a positive sign for income oriented investors.
The company announced that it has received a final award approval from Petrobras (PBR) for drilling and testing contracts. The estimated value of these contracts is more than $2 bln. This is not only an addition to the company's revenue. It improves HAL's position in Latin America's market.
Middle East Asia segment was performing well. Revenue increased 25%, while operating income rose 51%. The company seems to work hard on gaining ground in this tempting market. HAL stated that it is beginning to see payoff from the recent launch of the Singapore manufacturing center.
I think that HAL is well positioned for possible growth in all parts of the world. While oil prices have fluctuated back and forth for over a year, natural gas prices have been on the rise. While the company stated that they do not see significant increases in contracts due to the rise of the natural gas prices, I think that this is long-term positive. Higher natural gas prices would provide more incentives to deal with this market, and would eventually bring contracts to related companies.
HAL is trading at P/E of 14 and a forward P/E of 10. It represents a better value than its competition. BHI scores P/E of 16 and forward P/E of 10. SLB has a 17 P/E and a 12 forward P/E. If you believe in the future of oil industry, you must certainly consider adding HAL to your portfolio. The company presents both value and growth prospects. It is well diversified and has a clear strategy.