Summary
- Halliburton will report 3Q19 earnings on October 21, and the macro landscape does not seem very favorable.
- The large North America segment might only see upside from cost-cutting, while the international business could suffer from lower crude prices and decelerated economic growth.
- I stick with my previous opinion that HAL might continue to tread water in the foreseeable future.
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Another earnings season is upon us, and oilfield services giant Halliburton (HAL) should be getting ready to report on its third quarter performance on October 21. I believe the company will have a tough time instilling confidence in investors, other than through cost-cutting, as the macro landscape for energy companies seems to be still largely unfavorable.
Credit: Inside Energy
Tough environment
Analysts expect revenues to dip 5% YOY, the largest contraction since 2016. Lack of top-line traction will probably be caused by a number of factors, although the most impactful should be soft drilling and completion activity in U.S. land. As a quick reminder, North America represented 56% of Halliburton's revenues in 2Q19 (see breakdown below).
My suspicion is grounded on the fact that the management team seemed very content to adopt a defensive stance in the home continent last quarter, moving more aggressively to reduce headcount, cut capex and stack some of its fracking assets. Adjusted op income in the segment may still grow sequentially, however, as a result of cost mitigation initiatives.
