A Closer Look at Halliburton’s Q4 Performance

Halliburton (NYSE: HAL) released its fourth-quarter earnings report on January 22nd, posting a mixed set of results, and is down 5.6% since then (as of Jan 23.) at nearly $28 per share. The company’s non-GAAP earnings per share came in at $0.70, surpassing analyst expectations by a penny. However, its revenue of $5.6 billion fell short of forecasts by $30 million, representing a 2.4% year-over-year  (y-o-y) decline. 

After a 3% growth this year, we believe Halliburton stock, has upside potential in the longer run with limited growth prospects in the near term. HAL’s peer SLB stock (NYSE: SLB) is up 10% during the same period. SLB saw its revenues and earnings exceed expectations in Q4 results last week, driven by increased activity in North America and internationally. See What’s Next For SLB’s Stock After A Strong Q4?

We forecast HAL’s Revenues to be $23.1 billion for the fiscal year 2025, up marginally y-o-y. Looking at the bottom line, we now forecast EPS to reach $2.95. Given the changes to our revenues and earnings forecast, we have revised our HAL’s Valuation to $31 per share, based on $2.95 expected EPS and a 10.4x P/E multiple for the fiscal year 2025 – almost 10% higher than the current market price.

Q4 Snapshot

Region-wise in Q4, North America saw a 7% sequential and 9% y-o-y decrease in revenue to $2.2 billion, highlighting reduced hydraulic fracturing activity. On the international front, revenue was up 2% y-o-y at $3.4 billion, driven by strategic regional investments. The Middle East/Asia region witnessed a 9% y-o-y revenue increase, spurred by enhanced pressure pumping operations in Saudi Arabia, whereas Europe/Africa saw a revenue increase of 4% y-o-y.

The company’s exposure to the onshore frac market makes it particularly vulnerable to a weak demand environment in North America (responsible for 42% of total revenues). This has led to an 8% decline in North American revenues (in FY 2024) with service company discipline helping to maintain pricing. Halliburton is largely at the mercy of market conditions and the tepid oil price growth is not helping either. Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

That said, the company continues to increase its exposure to growth areas through internal product development. For example, Halliburton’s artificial lift product line is growing at double the rate of the rest of the business in international markets. Drilling services are another strong point for the company. HAL’s Drilling and Evaluation operating margin was up 4% in 2024, compared to a 4% decline in the Completion and Production (C&P) segment during the same period. The C&P segment was impacted by decreased North American stimulation activity and Latin American pressure pumping services. Halliburton’s 2024 full-year revenue remained steady at $22.9 billion while overall operating income declined 6% y-o-y $3.8 billion. Halliburton continues to prioritize returns over market share. The company is somewhat protected by the fact that close to 40% of its fleets are e-fleets under multi-year contracts. The company’s e-fleets will comprise 50% of its fleet by the end of 2025. 

Factors Impacting Oil Prices

Several key factors are poised to shape the global oil market in 2025. A significant rebound in China’s oil demand is anticipated, potentially boosting global oil trade, while the new U.S. administration’s stance on key oil-producing nations, including China, Russia, and Iran, will be closely monitored. The uncertain geopolitical landscape could lead to tighter supplies and higher prices. However, rising output from the U.S. and other non-OPEC countries, such as Canada and Brazil, has been balancing the market, limiting price increases. In addition, OPEC+ producers have decided to delay the gradual easing of output cuts until April 2025. This move is likely a response to weaker oil demand and booming production outside the group. As all these factors intersect, the global oil market will likely experience a complex and dynamic year, with multiple influences shaping its direction.

The International Energy Agency (IEA) has revised its 2025 oil demand growth projection downward to 1.05 million barrels per day (mb/d), a slight decrease from its previous forecast of 1.1 mb/d. Despite this adjustment, the IEA expects 2025 oil demand to surpass last year’s growth of 940k b/d, citing a modest improvement in the economic outlook for 2025. World oil demand is expected to reach 104 mb/d in 2025, fueled by an estimated growth of 1.05 mb/d.

The increase in HAL stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 22% in 2021, 74% in 2022, -6% in 2023, and -23% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

It is helpful to see how its peers stack up. HAL Peers shows how HAL’s stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 1/24/2025
[2] Cumulative total returns since the end of 2016

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