Halliburton: HAL Partial Sell Recommendation. We should hold 300 shares of HAL to build upon the 10%...
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Transcript of Halliburton: HAL Partial Sell Recommendation. We should hold 300 shares of HAL to build upon the 10%...
Halliburton: HALPartial Sell Recommendation
• We should hold 300 shares of HAL to build upon the 10% gain achieved over the past 11 months and take advantage of the positive outlook for 2013.
• We should sell 200 shares of HAL to lock in current gains.
Investment Thesis
• Locate oil and natural gas for companies• Determine if they can be produced.• Provide the services that allow oil and gas
companies to begin production• Well intervention, pressure control, and pipeline and
process services.
The Company
HAL Stock History
Thursday Snapshot
Close: 43.32
Open: 40.72
Bid: 43.32 x 400
Ask: 43.33 x 200
1y Target Est:
47.41
Beta: 1.82
Next Earnings Date:
N/A
Day's Range: 40.72 - 43.96
52wk Range: 26.28 - 41.44
Volume: 26,175,786
Avg Vol (3m): 10,654,000
Market Cap: 40.37B
P/E (ttm): 15.24
EPS (ttm): 2.84
Div & Yield: 0.36 (0.90%)
HAL vs Energy ETFs
HAL vs SLB and BHI
HAL vs WTIC and Brent Crude
2012 Performance
• After purchase, the stock price decreased rapidly due to 1. High guar gum cost (increased operating cost)2. Decrease in North American activity3. 2012 energy price decreases (through October)4. Deepwater Horizon – BP blamed, Transocean $400 M guilty plea, HAL largely unaccountable legally
• Steady increases since November are expected to continue due to 1. Solid financials (reasonable debt levels, good return
on equity) 2. Oil production expected to increase in the NA3. Foreign revenues continue to outpace spending
levels 4. P/E ratio: 14.7; 15% discount to 3-year avg. of 17.3
• Q4 Financials • Released Jan. 15; immediate increase in stock price• Showed higher than expected earnings • Strong 2013 outlook
2013 Projections
• In the fourth quarter, revenue of $7.3 billion was up 3% sequentially and represents the highest quarterly revenue in company history.
• NA…operating income was down 22% compared to Q3 results, driven by an increased consumption of our high priced supply of guar and continued pricing pressure around hydraulic fracturing contracts… and anticipate the NA rig count will improve from Q4 levels
• In the Eastern Hemisphere, revenue grew 11% sequentially, and operating income increased 35% sequentially, driven by year-end sales of completion tools, software, and other equipment. We believe activity levels will continue to grow in 2013, and anticipate full-year margins should average in the upper teens.
Executive Insights from the CEO
• Expected growth throughout 2013• Target stock price: $47 by year’s end (BLM, S&P)• Rebound of North American operations
• Guar Gum cost• Increased rig numbers
• Continual growth of foreign operations
The Bottom Line
SWOT Analysis
Strengths •Solid financial position (debt levels and return on equity)•Low P/E ratio•Better growth over past 3 years than two main competitors
Weaknesses•Sub par growth in net income•Natural gas prices are flattening out•Slowdown in NA gas production•Venezuela bolivar devaluation cost est. $30 M this Q1
Opportunities•Rebound in NA oil production•Upgraded to “buy” status by majority of analysts •Foreign revenues continue to outpace spending levels
Threats•Competition from SLB and BHI•Reduction in new oil fields in NA•Shrinking margins to compete with SLB and BHI
• Bought:• 200 Shares at $38.16 on 02/23/2012• 300 Shares at $36.81 on 02/09/2012
• Current Value:• 500 Shares at $43.32• Total Value: $21,660
Stock History
Sector: Energy (Energy and Utilities)Current Holdings: PXJ, FEN, VPU, AMLP, OXY, HALTarget (Current) Allocation as of 2012 Dec: 7.23% (8.96%)
Recommendation: Partial Sell• Sell 200 shares at current market price to lock 10-
15% profit• Hold the other 300 shares to capture an expected
greater future return
Recommendation