Shares of Halliburton Co. (HAL) hit a 52-week high of $57.42 on Feb 28. In fact, the Houston, TX-based oilfield services behemoth has seen its stock price climb some 14% year-to-date. This price appreciation can be attributed to its superior business model, attractive fundamentals and the ability to grow cash flow.
Why the Bullishness?
Halliburton is among the top three players in each of its product/service categories, and is present in all major hydrocarbon-producing regions of the world. The company, which has surpassed earnings estimates in each of the last 5 quarters, enjoys very strong relationships with both publicly-traded and national oil companies worldwide.
Halliburton’s international operations continue to reflect strong demand for its services on the back of higher activity. This is expected to be a key growth driver going forward with pricing in the region remaining competitive. We have identified Latin America – offering enough shale development opportunities – as the important market in this regard. Additionally, despite certain issues in Halliburton’s core U.S. segment, the long-term prospects for the business remain robust.
In September last, Halliburton got reprieve from the United States Department of Justice (DOJ), when it closed its investigation into the company’s role in the Gulf of Mexico’s Macondo well disaster. We believe that the judge’s acceptance of Halliburton’s guilty plea removes an overhang from the oilfield service provider’s future.
Finally, Halliburton’s positive ‘Analyst Day’ update, together with the recent increase in its quarterly dividend are other pieces of positive news. While the Analyst Day conveyed the world's second-largest oilfield services firm after Schlumberger Ltd.’s (SLB) intentions to outgrow the deepwater market by 25% over the next 3 years, the payout hike highlights Halliburton’s commitment to create value for shareholders.
Zacks Rank & Stock Picks
However, with Halliburton shares trading at 52-week high, any upside from here may be limited, as suggested by the company's Zacks Rank #4 (Sell).
Some better-ranked stocks in the ‘Oilfield Services’ sector include Emerge Energy Services L.P. (EMES) and Willbros Group Inc. (WG). Both of them carry a Zacks Rank #1 (Strong Buy).
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