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"Most people never run far enough on their first wind to find out they've got a second."

William James

Two large corporations - Halliburton and Exxon Mobil - are going to be examined in detail and pitted against each other in the hopes of finding a victor. Detailed data has also been provided on three other plays for investors who might be looking for other ideas. At the end of the article we will offer our opinion as to which one is better.

Reasons to be bullish on Halliburton (HAL):

  • A strong levered free cash flow of $867 million.
  • Net income surged from $1.1 billion in 2009 to $2.83 billion in 2011.
  • It's a high beta stock (1.87) which makes it a good candidate for covered writes.
  • Growth rates for 2012 and 2013 are projected to come to be in the 14.79% and 15.87% respectively.
  • It sports operating margins of 19%, profit margins of 11.5% and a massive operating cash flow of $3.6b billion.
  • EBITDA increased from $2.89 billion in 2009 to $6.07 billion in 2011.
  • Cash flow per share jumped from $2.38 in 2009 t0 $4.84 in 2011.
  • Sales increased from $1.4 billion in 2009 to $2.4 billion in 2011.
  • Annual EPS before NRI increased from $2.66 in 2007 to $3.36 in 2011.
  • It has a very low payout ratio of 11%.
  • Even though the dividend rate is low, it has more than made up for this via capital gains.
  • It has a strong quarterly earnings growth rate of 49.
  • A great quarterly revenue growth rate of 36%.
  • A good current and quick ratio of 2.89 and 2.19 respectively.
  • A very good interest coverage ratio of 20.
  • A good three year total return of 111%.
  • $100K invested for 10 years without reinvesting the dividends would have grown to $376. If the dividends were reinvested the return would be significantly higher.

Reasons to be bullish on Exxon Mobil Corporation (XOM):

  • A massive levered free cash flow of $19.87 billion.
  • It is one of the finest run integrated oil companies in the world.
  • Sales Vs 1 year ago improved by 25%.
  • The XTO acquisition gives Exxon access to significant unconventional resources.
  • In terms of financial health, Exxon is in excellent shape with an AAA credit profile.
  • It has a very robust investment program. It intends to invest $33-$37 billion annually through 2015.
  • A great long-term debt to equity ratio of 0.20.
  • Net income increased from $19 billion in 2009 to $41 billion in 2011.
  • EBITDA increased from $47 billion in 2009 to $89 billion in 2011.
  • Cash flow almost doubled from $6.62 in 2009 to $11.82 per share in 2011.
  • Annual EPS before NRI increased from $7.28 in 2007 to $8.42 in 2011.
  • Sales surged from $31 billion in 2009 to $48.6 billion in 2011.
  • A good five year dividend growth rate of 7.80%.
  • An excellent payout ratio of 22% and a great five year average payout ratio of 26%.
  • A good five year ROE average of 27%.
  • A splendid interest coverage ratio of 228.
  • A good quarterly revenue growth rate of 15%.
  • It sports a decent free cash flow yield of 6.13%.
  • A stellar record of consecutively increasing dividends for 29 years.
  • It is expanding its foothold in Canada, Argentina and Poland.
  • In 2001 it returned $29 billion to shareholders through dividends and share buy backs.
  • $100K invested for 10 years would have grown to $273k.

Company: Halliburton Co.

Levered Free Cash Flow = 867.12M

Basic Key ratios

Percentage Held by Insiders = 0.36

Growth

  1. Net Income ($mil) 12/2011 = 2839
  2. Net Income ($mil) 12/2010 = 1835
  3. Net Income ($mil) 12/2009 = 1145
  4. 12 months Net Income this Quarterly/12 months Net Income 4Q's ago = 54.71
  5. Quarterly Net Income this Quarterly/same Quarter year ago = 49.75
  1. EBITDA ($mil) 12/2011 = 6071
  2. EBITDA ($mil) 12/2010 = 4071
  3. EBITDA ($mil) 12/2009 = 2898
  4. Net Income Reported Quarterlytr ($mil) = 906
  5. Annual Net Income this Yr/ Net Income last Yr = 54.71
  6. Cash Flow ($/share) 12/2011 = 4.84
  7. Cash Flow ($/share) 12/2010 = 3.3
  8. Cash Flow ($/share) 12/2009 = 2.38
  1. Sales ($mil) 12/2011 = 24829
  2. Sales ($mil) 12/2010 = 17973
  3. Sales ($mil) 12/2009 = 14675
  1. Annual EPS before NRI 12/2007 = 2.66
  2. Annual EPS before NRI 12/2008 = 2.94
  3. Annual EPS before NRI 12/2009 = 1.35
  4. Annual EPS before NRI 12/2010 = 2.06
  5. Annual EPS before NRI 12/2011 = 3.36

Dividend history

  1. Dividend Yield = 1.10
  2. Dividend Yield 5 Year Average 1.2
  3. Annual Dividend 12/2011 = 0.36
  4. Annual Dividend 12/2010 = 0.36
  5. Forward Yield = 1.11
  6. Dividend growth rate = 3.01

Dividend sustainability

  1. Payout Ratio 06/2011 = 0.11
  2. Payout Ratio 5 Year Average 06/2011 = 0.17
  3. Change in Payout Ratio = -0.06

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = -37.99
  2. Next 3-5 Year Estimate EPS Growth rate = 13
  3. EPS Growth Quarterly(1)/Q(-3) = -147.06
  4. ROE 5 Year Average 06/2011 = 26.47
  5. Return on Investment 06/2011 = 19.18
  6. Debt/Total Cap 5 Year Average 06/2011 = 28.8
  1. Current Ratio 06/2011 = 2.81
  2. Current Ratio 5 Year Average = 3.08
  3. Quick Ratio = 2.19
  4. Cash Ratio = 0.95
  5. Interest Coverage Quarterly = 20.62

Valuation

  1. Book Value Quarterly = 14.36
  2. Price/ Book = 2.26
  3. Price/ Cash Flow = 6.71
  4. Price/ Sales = 1.2
  5. EV/EBITDA 12 Mo = 5.25

Company: Exxon Mobil Corporation

Levered Free Cash Flow = 19.87B

Basic Key ratios

Percentage Held by Insiders = 0.2

Number of Institutional Sellers 12 Weeks = 3

Growth

  1. Net Income ($mil) 12/2011 = 41060
  2. Net Income ($mil) 12/2010 = 30460
  3. Net Income ($mil) 12/2009 = 19280
  4. 12months Net Income this Quarterly/12 months Net Income 4Q's ago = 34.8
  5. Quarterly Net Income this Quarterly/same Quarter year ago = 1.62
  1. EBITDA ($mil) 12/2011 = 89087
  2. EBITDA ($mil) 12/2010 = 67978
  3. EBITDA ($mil) 12/2009 = 47242
  4. Net Income Reported Quarterlytr ($mil) = 9400
  5. Annual Net Income this Yr/ Net Income last Yr = 34.8
  6. Cash Flow ($/share) 12/2011 = 11.82
  7. Cash Flow ($/share) 12/2010 = 8.97
  8. Cash Flow ($/share) 12/2009 = 6.62
  1. Sales ($mil) 12/2011 = 486429
  2. Sales ($mil) 12/2010 = 383221
  3. Sales ($mil) 12/2009 = 310586
  1. Annual EPS before NRI 12/2007 = 7.28
  2. Annual EPS before NRI 12/2008 = 8.47
  3. Annual EPS before NRI 12/2009 = 4.01
  4. Annual EPS before NRI 12/2010 = 6.22
  5. Annual EPS before NRI 12/2011 = 8.42

Dividend history

  1. Dividend Yield = 2.30
  2. Dividend Yield 5 Year Average 12/2011 = 2.19
  3. Annual Dividend 12/2011 = 1.85
  4. Annual Dividend 12/2010 = 1.74
  5. Forward Yield = 2.19
  6. Dividend 5 year Growth = 7.80

Dividend sustainability

  1. Payout Ratio 06/2011 = 0.22
  2. Payout Ratio 5 Year Average 12/2011 = 0.26
  3. Payout Ratio 5 Year Average 09/2011 = 0.26
  4. Payout Ratio 5 Year Average 06/2011 = 0.26
  5. Change in Payout Ratio = -0.04

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = -5.26
  2. Next 3-5 Year Estimate EPS Growth rate = 5.69
  3. EPS Growth Quarterly(1)/Q(-3) = 107.94
  4. ROE 5 Year Average 12/2011 = 27.42
  5. ROE 5 Year Average 09/2011 = 27.42
  6. ROE 5 Year Average 06/2011 = 27.79
  7. Return on Investment 06/2011 = 23.96
  8. Debt/Total Cap 5 Year Average 12/2011 = 6.36
  9. Debt/Total Cap 5 Year Average 09/2011 = 6.36
  10. Debt/Total Cap 5 Year Average 06/2011 = 6.32
  1. Current Ratio 06/2011 = 0.94
  2. Current Ratio 5 Year Average = 1.19
  3. Quick Ratio = 0.75
  4. Cash Ratio = 0.75
  5. Interest Coverage Quarterly = 228.21

Valuation

  1. Book Value Quarterly = 33.54
  2. Price/ Book = 2.56
  3. Price/ Cash Flow = 7.26
  4. Price/ Sales = 0.83
  5. EV/EBITDA 12 Mo = 4.5

Company: Chevron Corp (CVX)

Levered Free Cash Flow = 13.87B

Basic Key ratios

  1. Percentage Held by Insiders = 0.16
  2. Number of Institutional Sellers 12 Weeks = 1

Growth

  1. Net Income ($mil) 12/2011 = 26895
  2. Net Income ($mil) 12/2010 = 19024
  3. Net Income ($mil) 12/2009 = 10483
  4. 12mo Net Income this Q/ 12mo Net Income 4Q's ago = 41.37
  5. Q Net Income this Q/ same qtr yr ago = -3.25
  1. EBITDA ($mil) 12/2011 = 60545
  2. EBITDA ($mil) 12/2010 = 45168
  3. EBITDA ($mil) 12/2009 = 30666
  4. Net Incm Rpt Qtr ($mil) = 5123
  5. Anl Net Incm this Yr/ Net Incm last Yr = 41.37
  6. Cash Flow ($/sh) 12/2011 = 19.99
  7. Cash Flow ($/sh) 12/2010 = 15.91
  8. Cash Flow ($/sh) 12/2009 = 10.86
  9. Div 5yr Growth 12/2011 = N/A
  1. Sales ($mil) 12/2011 = 253706
  2. Sales ($mil) 12/2010 = 204928
  3. Sales ($mil) 12/2009 = 171636
  1. Anl EPS before NRI 12/2007 = 8.63
  2. Anl EPS before NRI 12/2008 = 11.38
  3. Anl EPS before NRI 12/2009 = 4.84
  4. Anl EPS before NRI 12/2010 = 9.45
  5. Anl EPS before NRI 12/2011 = 13.44

Dividend history

  1. Dividend Yield = 3.2
  2. Dividend Yield 5 Yr Average 09/2011 = 3.22
  3. Annual Dividend 12/2011 = 3.09
  4. Annual Dividend 12/2010 = 2.84
  5. Forward Yield = 2.96
  6. Div 5yr Growth = 8.5%

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.24
  2. Payout Ratio 5 Yr Average 09/2011 = 0.31
  3. Change in Payout Ratio = -0.07

Performance

  1. Percentage change Price 52 Wks Relative to S&P 500 = 1.91
  2. Standard Dev Target Price Estimate = 6.07
  3. Average EPS Surprise Last 4 Qtr = 4.16
  4. EPS % Change F2/F1 = 3.68
  5. Next 3-5 Yr Estimate EPS Growth rate = 7.54
  6. Std Dev 3-5 Yr Estimate EPS Growth rate = 1.35
  7. EPS Growth Q(1)/Q(-3) = -102.38
  8. 5 Yr Historical EPS Growth 09/2011 = 5.11
  9. ROE 5 Yr Average 09/2011 = 21.28
  10. Return on Investment 09/2011 = 21.1
  11. Return on Investment 06/2011 = 21.68
  12. Debt/Tot Cap 5 Yr Average 09/2011 = 8.36
  1. Current Ratio 09/2011 = 1.58
  2. Current Ratio 06/2011 = 1.64
  3. Current Ratio 5 Yr Average = 1.4
  4. Quick Ratio = 1.42
  5. Cash Ratio = 0.77
  6. Interest Coverage 12/2011 = N/A

Valuation

  1. Price/ Book = 1.64
  2. Price/ Cash Flow = 5.00
  3. Price/ Sales = 0.79
  4. EV/EBITDA 12 Mo = 3.41

EV Energy Partners LP (EVEP)

Levered Free Cash Flow: 56.72M

Growth

  1. Net income for the past three years
  2. Net Income ($mil) 2009 = $1
  3. Net Income ($mil) 2010 = $106
  4. Net Income ($mil) 2011 = $103
  1. Total cash flow from operating activities
  2. 2009 = $109.53 million
  3. 2010 = $122.36 million
  4. 2011 = $167.22 million

Performance

  1. ROE = 10.13%
  2. Return on Assets = 5.63%
  3. Total return last 3 years = 332%
  4. Total return last 5 years = 111%
  5. Quick Ratio = 4.33
  6. Current Ratio = 4.00
  7. LT Debt to Equity = 1.04
  8. Total Debt to Equity = 1.04
  9. Asset Turnover = 0.13
  10. Interest coverage= 4.40
  11. 5 year sales growth= 73%

Dividend history and sustainability

  1. Payout ratio = 193%
  2. Dividend Yield=4.7%
  3. Consecutive dividend increases = 4 years
  4. Dividend yield 5 year average = 9.9
  5. Paying dividends since = 2007

Valuation

  1. Price to Sales = 9.44
  2. Price to Book = 2.69
  3. Price to Cash Flow = 13.80
  4. Price to Free Cash Flow = 47.40

Total S.A. (TOT)

Levered Free Cash Flow: 3.99B

Growth

  1. Net income for the past three years
  2. Net Income ($mil) 2009 = $12034
  3. Net Income ($mil) 2010 = $14351
  4. Net Income ($mil) 2011 = $17523
  1. Total cash flow from operating activities
  2. 2008 = $26.32 billion
  3. 2009 = $17.74 billion
  4. 2010 = $24.81 billion

Performance

  1. Quick Ratio = 0.98
  2. Current Ratio = 1.40
  3. LT Debt to Equity = 0.34
  4. Total Debt to Equity = 0.33
  5. Interest Coverage = 40.20
  6. Inventory Turnover = 6.89
  7. Asset Turnover = 1.14
  8. ROE = 17.56%
  9. Return on Assets = 7.4%
  10. Quarterly Earnings Growth = 12.8%
  11. Total return last 3 years = 20%

Dividend history and sustainability

  1. Payout ratio = 37.00
  2. Dividend growth rate 5 year average = 4.8%
  3. Paying dividends since = 1992
  4. Dividend yield 5 year average = 4.8

Valuation

  1. Price to Sales = 0.52
  2. Price to Book = 1.28
  3. Price to Tangible Book = 1.56
  4. Price to Cash Flow = 4.20

Conclusion

This is a hard a call. On certain factors, Exxon excels.

Higher yield 2.3% vs. 1.1 for Halliburton.

Interest coverage 228 vs. 20.62 for Halliburton.

A slightly higher five year ROE average of 27% Vs 26% for Halliburton.

A five-year dividend growth rate of 7.8% Vs 3.01% for Halliburton.

Exxon sports higher profit margins 12.48% Vs 11.5%.

Halliburton however, sports higher operating margins 19% vs. 9.4% for Exxon.

Halliburton also sports better current and quick ratios, has a much lower payout ratio and has generated better returns in the past 10 years than Exxon. It also has a higher projected EPS growth over the next 3-5 years than Exxon. It also leads Exxon on quarterly revenue and earnings growth rates - 36 and 49% respectively vs. Exxon's 15% and 1.6%, respectively.

One could argue that the host of lawsuits are a black cloud hanging on Halliburton, and this is clearly reflected in its share price. While Exxon's shares are trading close to its highs, Halliburton's are trading close to 52 week lows. Even though it's possible many of these cases could/might end up being dismissed, one can never predict how things will actually unfold in the future. Here are some of the pending cases the outcomes of which could potentially have a material impact on Halliburton.

BP has opened 2012 with a new legal move in its battle to force contractor Halliburton to help pay the costs and expenses it incurred to clean up the 2010 Gulf of Mexico oil spill, which the oil major previously put at around $42 billion. Halliburton, the company that cemented the doomed well, had asked a court to force BP to recognize a contractual agreement that protected Halliburton against possible spill clean-up costs.

In response, BP asked a court in a filing on Monday not to give a summary judgment on that request - one that would hand down a ruling without a full trial being held and could let Halliburton off the hook for a share of the total spill costs.

In a pair of lawsuits filed Friday, Halliburton accuses BP of fraud and defamation, saying BP provided inaccurate information about the location of oil and gas producing zones in the well before the cementing job Halliburton performed.

The final cement job in the well is supposed to push cement at least 500 feet above the deepest formation that has hydrocarbons. Halliburton claims BP failed to inform it of several formations in an effort to save money on changes to the well design that would have been needed.

Without knowing the proper locations of the formations, Halliburton says, the company wasn't able to design a cement mix appropriate for the conditions.

The justices unanimously ruled that a U.S. appeals court erred in rejecting class certification in a securities fraud lawsuit filed in 2002 on behalf of all buyers of Halliburton stock between June 1999 and December 2001.

The high court reinstated a lawsuit by a group of mutual and pension fund investors who claimed Halliburton understated its asbestos liabilities while overstating revenues in its engineering and construction business and the benefits of its merger with Dresser Industries.

Halliburton faces lawsuits over groundwater pollution near a now-closed facility in Oklahoma that cleaned missile casings for the U.S. Defense Department during the Cold War, the company said on Friday.

Halliburton, which now specializes in oilfield services, said one of its units cleaned solid fuel from missile casings between 1965 and 1991 at a semi-rural facility on the north side of Duncan, Oklahoma. It was closed in the mid-1990s.

A component of the fuel was ammonium perchlorate, a salt that is highly soluble in water. Halliburton said it had been discovered in the soil and groundwater on its site and in certain residential water wells near the property.

On the other hand, one could argue that a lot of the worst news is already priced in and that any form of good news could send the stock soaring.

From a technical perspective Halliburton appears to be trying to put in a bottom and a weekly close above $35 will turn the outlook bullish. While Exxon does have a higher yield and a higher five-year dividend growth rate, one could argue that Halliburton overcomes this shortfall with higher capital gains. This one is truly hard to call and if push came to shove we would lean with Exxon only because no one can predict with any degree of certainty how these lawsuits will pan out.

Which one do you think would make for a better investment and why? Also please let us know if you like this series and what other stocks you might want us to compare. We cannot promise that we will cover all the stocks mentioned but will try at least to cover the most compelling ones.

What we think a lot of investors can agree on is that the markets are extremely overbought, and that it would be best to wait for a pullback before committing large sums of money to this market.

Disclaimer

This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware.

Source: Face-Off: Halliburton Vs. Exxon Mobil

Additional disclosure: EPS, Price, EPS surprise charts obtained from zacks.com. A large portion of the historical data used in this article was obtained from zacks.com.