Halliburton Co. (HAL) is a provider of services and products to the energy industry related to the exploration, development and production of oil and natural gas. Shares of the company have tumbled more than 2.5% on Monday's trading even after reporting better-than-expected earnings for the third quarter of 2015.
Q3 2015 results
The company reported a loss of $54 million or 6 cents per share, compared to $1.2 billion or $1.41 per share obtained in the same quarter a year ago. Excluding one-time items, EPS reached 31 cents per share, beating estimates by 4 cents. Further, revenue declined by 35.8% and reached $5.6 billion, but was lower than analysts estimates of $5.64 billion.
The company serves oil and natural gas companies throughout the world and operates in two segments: Completion and Production and Drilling and Evaluation. Completion and Production revenue in Q3 declined to $3.2 billion, a decrease of 7% from the second quarter. Reasons behind this are the decline in activity and pricing pressure in the U.S. market, as well as in Latin America, Middle East/Asia, and in Europe and Africa. In regions such as Argentina, Brazil and Canada, however, there was higher activity.
Drilling and Evaluation revenue in the third quarter was $2.4 billion, a decrease of 4% from the second quarter.
"We are pleased with our third quarter results, especially the resilience of our international business, where we outperformed our largest peer on a sequential and year-over-year basis for both revenue and margins," said Halliburton President Jeff Miller.
Stock price performance
The company is selling at a premium. The P/E ratio as of Aug. 27 is 21.23, which is higher than the industry median of 13.40x.
The stock reached its 52-week high at the end of last year, and since then it has not reversed the downward trend. The stock plummeted 4.2% year to date and 32.3% in the past 12 months.
Looking forward
The company has an extensive geographic reach, with operations in international markets such as Canada, Malaysia, Mexico, Singapore and the U.K. In the U.S., it has a leading position as the largest oilfield services company.
In the Drilling and Evaluation segment, the company expects to grow faster than the industry median, but due to current market conditions, I am afraid this won't happen for many years.
Final comment
We think that Halliburton is trading low, and it might be a good opportunity to buy this stock. Gurus have also been active in the company in Q3 2015. Steven Romick (Trades, Portfolio) and Ken Fisher (Trades, Portfolio) have initiated new positions in the stock in the third quarter with 1,012,740 and 24,085 shares.
Disclosure: Omar Venerio holds no position in any stocks mentioned.
This article first appeared on
GuruFocus.