Halliburton: Positive Catalysts Mean Further Gains Ahead

Oct.22.13 | About: Halliburton Company (HAL)

Halliburton (NYSE:HAL) is having a nice day despite delivering so-so earnings results. EPS did beat consensus by a penny, but revenue came in $60mm light with a total of $7.47B for the quarter. The core reason the stock is moving up is the company is starting to receive some positive notes from analysts.

I have owned and have been high on this oil service firm since it traded at $30 a share late last year. The shares have rose to north of $50 a share since then but the stock still looks like it could go higher as valuation is still reasonable and the company is gaining positive catalysts

Recent Positive Catalysts:

  • Deutsche Bank just substantially raised its price target on Halliburton . The German investment bank chose to look past an average earnings report and sees brighter days ahead. It goes to a price target of $84 a share from $55 previously. Don't see that kind of upward revision on a price target too often.
  • In addition, Jefferies' reiterated its "Buy" rating and moved its price target to $60 a share from $58 previously this week.
  • Bernstein also came out Tuesday reiterating its "Outperform" rating and raised its price target to $69 a share from $55 previously.
  • Goldman Sachs recently called out the company as one of the beneficiaries of the continuing boom in energy production in the Bakken shale formation.
  • Finally, the consensus earnings estimate for FY2014 has moved up ~4% over the past three months. Given the average consensus earnings estimate for companies in the S&P have come down more than 5% over the past 90 days, this is encouraging.

4 additional reasons HAL has upside from $51 a share:

  1. Earnings are moving up at solid clip. The company earned just under $3 a share in FY2012 but should earn ~$3.20 this fiscal year and analysts see over $4.25 in EPS for FY2014.
  2. Revenue growth is accelerating. Halliburton should post a sales increase of 3% to 4% in FY2013 but the consensus is for revenues to rise 8% to 12% in FY2014. The stock sports a five year projected PEG of under 1 (.78).
  3. The stock sells for just 12x forward earnings, a discount to its five year average (14.1).
  4. On a price to sales basis Halliburton (1.61) is much cheaper than the largest oil services firm Schlumberger (NYSE:SLB) (2.69).

Disclosure: I am long HAL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.