Halliburton (NYSE:HAL) broached the $60 a share level yesterday to hit all-time highs. I have been long the shares since the high $30s and been advocated for these undervalued shares for over a year. Although the stock has posted huge gains over the past twelve months, they still have upside.
The S&P 500 is going for roughly 16x forward earnings and the companies within the index are expected to produce a 4% overall Y/Y gain in revenues in 2014. Halliburton in contrast is priced at just 15x forward earnings with revenue gains that should be at least twice the average of the S&P 500 in each of the next two years.
The largest oil services concern Schlumberger (NYSE:SLB) goes for over 17x forward earnings even though it has the almost exact same projected revenue and earnings growth as Halliburton over the next two fiscal years.
One of the other things I like about Halliburton over Schlumberger besides valuation is that it is more exposed to the geopolitical stable North American land market. Halliburton has a bigger percentage of revenues coming from the U.S. land market than any of the other major oil services concern. It gets just over 50% of its overall revenues from North America.
Halliburton is also likely to benefit from increases in prices for pressure pumping as demand for fracking services rises in the wake of the recent increases in natural gas prices. Raymond James recently upgraded its rating on Halliburton primarily on this factor. Halliburton currently holds the market-leading position in the pressure pumping industry. The analyst firm upped its EPS projection for FY2014 & FY2015 on the better outlook for natural gas production services and has a "Strong Buy" rating on the shares.
An investor has to like Halliburton's earning trajectory. The company earned $3.15 in FY2013 and the consensus EPS projection for FY2014 is just under $4 a share. FY2015's projected earnings call for just over $5 a share in profits. The stock has a five year projected PEG of under 1 (.68).
By the end of the year I think Halliburton will be valued around the same 14-15x forward earnings it is currently. Given the consensus EPS for 2015 of ~$5 a share, this gives us a year end target of $70 to $75 a share; implying 15% to 20% upside from here.
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.