On Tuesday, Wolfe Research adjusted its outlook on Halliburton (NYSE: NYSE:HAL), a prominent oilfield services company, by increasing its price target to $52.00 from the previous $45.00, while reiterating an Outperform rating on the stock. This change reflects the firm's analysis of Halliburton's year-to-date and annual performance relative to its peers and market indices.
Halliburton's shares have risen by 7% since the beginning of the year, outperforming the Services sector's average which has seen a 5% decline. However, it has not kept pace with the broader energy index (XOP), which has gained 13%, but is aligned with the S&P 500's increase of 5%. Looking at a longer time frame, over the past 12 months, Halliburton's stock has climbed by 16%, surpassing the Services sector's average growth of 4%, but lagging behind the XOP's 22% and the S&P 500's 21%.
The firm justifies its Outperform rating and new price target by valuing Halliburton using EV/EBITDA based on the company's projected EBITDA for 2024. According to the firm's analysis, Halliburton's significant exposure to the North American market (NAM) has impacted its valuation, due to the stagnant oilfield services and equipment (OFSE) activity in the region compared to international markets.
Despite these challenges, Halliburton's strategy of improving its product portfolio has led to its outperformance against the broader North American market. Wolfe Research believes that this justifies a narrowing of the valuation gap. Additionally, the firm highlights Halliburton's aggressive shareholder returns and total shareholder return (TSR) yield as leading among its peers.
The company's international presence is also noteworthy, with product enhancements contributing to market share gains in non-NAM markets. These developments have been identified as key drivers behind the positive outlook and the increased price target for Halliburton's shares.
InvestingPro Insights
As Wolfe Research updates its outlook on Halliburton (NYSE: HAL), emphasizing the company's market performance and strategic positioning, InvestingPro data and tips provide additional context for investors. Halliburton boasts a perfect Piotroski Score of 9, indicating high financial health, and it trades at an attractive P/E ratio of 13.14, suggesting that the stock may be undervalued relative to its near-term earnings growth potential. Moreover, with a PEG Ratio of just 0.19 for the last twelve months as of Q4 2023, the company's growth rate is priced competitively relative to its earnings growth.
While Halliburton has shown some inconsistencies with respect to gross profit margins and stock price volatility, it has also demonstrated resilience by maintaining dividend payments for 54 consecutive years. This commitment to shareholder returns is further evidenced by a dividend yield of 1.76% as of the latest data. Additionally, the company's liquid assets surpass short-term obligations, suggesting a solid liquidity position.
The stock's recent performance includes a 10.22% total return over the past three months, complementing the longer-term growth narrative Wolfe Research presents. For those seeking deeper insights, there are additional InvestingPro Tips available, which can be accessed with a subscription. Use coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, and unlock the full spectrum of data and analytics that InvestingPro offers, including a total of 10 valuable tips for Halliburton.
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