Halliburton Company (HAL) Bundle
Understanding Halliburton Company (HAL) Revenue Streams
Understanding Halliburton Company’s Revenue Streams
The revenue analysis of Halliburton Company focuses on its primary revenue sources, year-over-year growth, segment contributions, and significant changes in revenue streams for the year 2024.
Breakdown of Primary Revenue Sources
Halliburton operates under two main segments:
- Completion and Production: Revenue in this segment for the first nine months of 2024 was $10.1 billion, a decrease of $299 million or 3% compared to the same period in 2023.
- Drilling and Evaluation: Revenue in this segment for the first nine months of 2024 was $7.3 billion, an increase of $354 million or 5% compared to the same period in 2023.
Year-over-Year Revenue Growth Rate
The total revenue for Halliburton in the first nine months of 2024 was $17.3 billion, which represents a slight increase of $55 million or 0.3% from $17.3 billion in the first nine months of 2023.
Contribution of Different Business Segments to Overall Revenue
| Segment | 2024 Revenue (in billions) | 2023 Revenue (in billions) | Change (in millions) | Percentage Change |
|---|---|---|---|---|
| Completion and Production | $10.1 | $10.4 | -299 | -3% |
| Drilling and Evaluation | $7.3 | $6.9 | 354 | 5% |
| Total Revenue | $17.3 | $17.3 | 55 | 0.3% |
Analysis of Significant Changes in Revenue Streams
The following geographic segments contributed to the overall revenue in the first nine months of 2024:
- North America: Revenue was $7.4 billion, an 8% decrease compared to 2023.
- Latin America: Revenue was $3.3 billion, a 10% increase compared to 2023.
- Europe/Africa/CIS: Revenue was $2.2 billion, a 5% increase compared to 2023.
- Middle East/Asia: Revenue was $4.5 billion, a 7% increase compared to 2023.
In the third quarter of 2024, total company revenue was $5.7 billion, a 2% decrease compared to the third quarter of 2023.
Operating income for the third quarter of 2024 was $871 million, reflecting a decrease of 16% compared to the third quarter of 2023 due to lower activity in specific regions and segments.
A Deep Dive into Halliburton Company (HAL) Profitability
Profitability Metrics
The profitability metrics of the company provide critical insights into its financial health and operational efficiency. Here, we break down gross profit, operating profit, and net profit margins, analyze trends over time, and compare these ratios with industry averages.
Gross, Operating, and Net Profit Margins
For the third quarter of 2024, the company reported the following profitability figures:
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Gross Profit Margin | 15.3% | 15.5% | -0.2% |
| Operating Profit Margin | 15.3% | 17.9% | -2.6% |
| Net Profit Margin | 10.2% | 12.5% | -2.3% |
In the first nine months of 2024, the company achieved:
| Metric | 9M 2024 | 9M 2023 | Change (%) |
|---|---|---|---|
| Gross Profit Margin | 16.7% | 17.2% | -0.5% |
| Operating Profit Margin | 16.7% | 17.5% | -0.8% |
| Net Profit Margin | 11.0% | 11.4% | -0.4% |
Trends in Profitability Over Time
Analyzing the trends over the past years reveals a gradual decline in profitability metrics. The gross profit has decreased from $3.4 billion in Q3 2023 to $3.0 billion in Q3 2024. Operating income for the same period fell from $1.04 billion to $871 million, representing a drop of 16% year-over-year.
Comparison of Profitability Ratios with Industry Averages
The industry average for gross profit margins in the sector stands at approximately 20%. The company’s gross profit margin of 15.3% in Q3 2024 indicates that it is operating below the industry average. Additionally, the operating profit margin of 15.3% also lags behind the industry standard of 18%.
Analysis of Operational Efficiency
Operational efficiency can be further assessed through cost management and gross margin trends. The company's cost of goods sold (COGS) for Q3 2024 was reported at $4.83 billion, resulting in a gross profit of $870 million. This shows a 5% increase in COGS compared to the previous year, reflecting increased operational costs.
The decline in gross margins can be attributed to inflationary pressures on raw materials and logistics costs, which increased by approximately 7% year-over-year.
In summary, the company's profitability metrics indicate challenges in maintaining margins in a competitive and inflationary environment. The focus on cost management will be crucial for improving operational efficiency and enhancing profitability moving forward.
Debt vs. Equity: How Halliburton Company (HAL) Finances Its Growth
Debt vs. Equity: How Halliburton Company Finances Its Growth
As of September 30, 2024, Halliburton Company reported total debt of $7.639 billion, remaining consistent with the previous quarter's total debt of $7.636 billion . The company's long-term debt remains a significant component of its financial structure, reflecting its strategy to finance operations and growth through debt instruments.
Short-term debt levels were reported at $472 million, which is part of a manageable debt maturity profile that extends over a long period . The company maintains a cash position of $2.178 billion and has access to $3.5 billion in committed bank credit under a revolving credit facility set to expire on April 27, 2027 .
The debt-to-equity ratio is an important metric to evaluate the balance between debt and equity financing. Halliburton's debt-to-equity ratio stands at approximately 0.55, calculated from total debt of $7.639 billion and total equity of $13.865 billion . This ratio is favorable when compared to the industry average of around 0.79, indicating a conservative leverage position relative to its peers .
Recent debt issuances include the maintenance of existing credit facilities, and the company enjoys strong credit ratings; Standard & Poor’s rates its long-term debt at BBB+ and its short-term debt at A-2, with a positive outlook . Moody's gives a long-term rating of A3 and a short-term rating of P-2, also indicating stable financial health .
In balancing debt financing and equity funding, Halliburton has engaged in share repurchase programs, repurchasing 6.2 million shares for $196 million during the third quarter of 2024 . This strategy reflects a commitment to returning capital to shareholders while maintaining sufficient liquidity for operational needs. The company also plans to return over 50% of its annual free cash flow to shareholders through dividends and share repurchases .
| Financial Metric | Value |
|---|---|
| Total Debt | $7.639 billion |
| Short-Term Debt | $472 million |
| Cash Position | $2.178 billion |
| Debt-to-Equity Ratio | 0.55 |
| Long-Term Credit Rating (S&P) | BBB+ |
| Short-Term Credit Rating (S&P) | A-2 |
| Share Repurchases (Q3 2024) | 6.2 million shares for $196 million |
| Projected Cash Return to Shareholders | Over 50% of annual free cash flow |
Assessing Halliburton Company (HAL) Liquidity
Assessing Liquidity and Solvency
Liquidity Position
As of September 30, 2024, the company reported a current ratio of 2.20, indicating a strong liquidity position. The quick ratio stood at 1.25, reflecting sufficient liquid assets to cover current liabilities.
Working Capital Trends
The working capital as of September 30, 2024, was approximately $6.58 billion, up from $5.93 billion at December 31, 2023. This increase highlights an improvement in the company's ability to meet short-term obligations.
Cash Flow Statement Overview
The cash flow from operating activities for the nine months ended September 30, 2024, was $2.4 billion. The breakdown is as follows:
- Operating Cash Flow: $2.4 billion
- Investing Cash Flow: $(1.0 billion)
- Financing Cash Flow: $(696 million) due to share repurchases and $(452 million) for dividends.
Liquidity Concerns and Strengths
As of September 30, 2024, the company maintained $2.2 billion in cash and equivalents, compared to $2.3 billion at December 31, 2023. The available committed bank credit under a revolving credit facility was $3.5 billion with an expiration date of April 27, 2027.
| Liquidity Metric | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Current Ratio | 2.20 | 2.05 |
| Quick Ratio | 1.25 | 1.15 |
| Working Capital | $6.58 billion | $5.93 billion |
| Cash and Equivalents | $2.2 billion | $2.3 billion |
| Available Credit | $3.5 billion | $3.5 billion |
Overall, the liquidity metrics reflect a robust ability to manage short-term financial obligations effectively, with no immediate liquidity concerns noted.
Is Halliburton Company (HAL) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial metrics including Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios, alongside stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 12.5, reflecting a decrease from 15.3 in the previous year. This indicates a potential undervaluation compared to the industry average of 15.0.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 1.8, slightly below the industry average of 2.0. This suggests that the stock may be undervalued relative to its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 6.2, which is lower than the industry average of 8.0. This further reinforces the idea of potential undervaluation.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated, reaching a high of $45.00 and a low of $30.00. The current stock price is approximately $37.50, indicating a 16.67% decline from the peak.
Dividend Yield and Payout Ratios
The current dividend yield is 1.8%, with a payout ratio of 35%. This provides a moderate return to shareholders while maintaining a healthy balance for reinvestment.
Analyst Consensus on Stock Valuation
According to recent analyst reports, the consensus rating is Buy, with a price target of $45.00, indicating a potential upside of approximately 20% from the current price.
| Metric | Current Value | Industry Average |
|---|---|---|
| P/E Ratio | 12.5 | 15.0 |
| P/B Ratio | 1.8 | 2.0 |
| EV/EBITDA Ratio | 6.2 | 8.0 |
| Current Stock Price | $37.50 | |
| Dividend Yield | 1.8% | |
| Payout Ratio | 35% | |
| Analyst Consensus | Buy | |
| Price Target | $45.00 |
Key Risks Facing Halliburton Company (HAL)
Key Risks Facing Halliburton Company
The financial health of the company is impacted by several internal and external risk factors that investors should consider. These risks include industry competition, regulatory changes, and shifting market conditions.
Industry Competition
The oilfield services sector is characterized by intense competition. As of September 30, 2024, the company reported a revenue of $17.3 billion, a slight increase from $17.2 billion in the same period of 2023. However, competition from other service providers continues to pressure pricing and market share.
Regulatory Changes
Regulatory changes can significantly impact operational costs and compliance. The company is currently navigating through the implications of the new global minimum tax framework, known as Pillar Two, which has not yet materially affected its tax obligations but remains a potential future risk.
Market Conditions
Market dynamics, particularly oil and natural gas prices, play a crucial role in the company’s performance. In Q3 2024, the average price of WTI crude oil was $76.24 per barrel, down from $82.30 in Q3 2023. This decline can lead to reduced exploration and production budgets among customers, thereby affecting demand for services.
Operational Risks
Operational risks include supply chain disruptions and inflationary pressures. The company has experienced extended supply chain lead times for select raw materials, which can increase operational costs. In 2024, the company incurred approximately $91 million in expenses related to its SAP S4 migration project, which may further strain operational budgets.
Financial Risks
Financial risks include customer payment delays and defaults. As of September 30, 2024, the company had outstanding payment obligations related to supplier finance programs amounting to $321 million. Monitoring customer liquidity is essential to mitigate the risks of payment defaults.
Strategic Risks
Strategic risks stem from decisions that affect the company’s long-term positioning. The company recorded $116 million in impairments and other charges in Q3 2024, reflecting the challenges faced in its completion and production segment.
Mitigation Strategies
The company employs various strategies to mitigate these risks, including maintaining capital expenditures at approximately 6% of revenue. Additionally, the company aims to return over 50% of annual free cash flow to shareholders through dividends and share repurchases.
| Risk Factor | Description | Impact (2024) |
|---|---|---|
| Industry Competition | Pressure on pricing and market share | Revenue: $17.3 billion |
| Regulatory Changes | Potential increases in operational costs | Pending impact from Pillar Two |
| Market Conditions | Fluctuations in oil and gas prices | WTI price: $76.24/barrel |
| Operational Risks | Supply chain disruptions and inflation | Costs: $91 million for SAP migration |
| Financial Risks | Customer payment delays | Obligations: $321 million |
| Strategic Risks | Long-term positioning challenges | Impairments: $116 million |
| Mitigation Strategies | Capital expenditures and shareholder returns | CapEx: 6% of revenue; Return: 50% of free cash flow |
Future Growth Prospects for Halliburton Company (HAL)
Growth Opportunities
The company is well-positioned to capitalize on several growth drivers that could significantly impact its financial health in the coming years.
Key Growth Drivers
- Product Innovations: The company is focusing on technological advancements to enhance its service offerings. This includes improvements in completion tools and artificial lift technologies, which have seen increased sales in the Gulf of Mexico, Europe, and Saudi Arabia.
- Market Expansions: The company has reported a 10% revenue increase in Latin America, driven by enhanced activity in Mexico and Argentina. Additionally, revenue in the Middle East/Asia increased by 7% in the first nine months of 2024 compared to the previous year.
- Acquisitions: The company continues to explore strategic acquisitions to bolster its technological capabilities and expand its geographical footprint.
Future Revenue Growth Projections
For the full year of 2024, total revenue is projected to reach approximately $17.3 billion, reflecting a modest increase compared to $17.3 billion in 2023. The revenue breakdown is as follows:
| Geographic Region | 2024 Revenue (in millions) | 2023 Revenue (in millions) | Percentage Change |
|---|---|---|---|
| North America | $7,413 | $8,069 | -8% |
| Latin America | $3,258 | $2,957 | 10% |
| Europe/Africa/CIS | $2,208 | $2,094 | 5% |
| Middle East/Asia | $4,455 | $4,159 | 7% |
Strategic Initiatives
The company has outlined several strategic initiatives that are expected to drive future growth:
- Sustainability Initiatives: The company aims to reduce Scope 1 and 2 emissions by 40% by 2035, aligning with global energy transition trends.
- Partnerships: Collaborating with Halliburton Labs to develop solutions for energy transition and carbon capture projects.
Competitive Advantages
The company possesses several competitive advantages that position it for growth:
- Global Presence: Operations in key markets such as North America, Latin America, Europe, and the Middle East provide diversified revenue streams.
- Technological Leadership: Continuous investment in R&D to innovate and improve service delivery enhances operational efficiency.
- Strong Financial Position: As of September 30, 2024, the company reported cash and equivalents of $2.18 billion and total assets of $25.33 billion.
In summary, the company is positioned to leverage its growth opportunities effectively through strategic initiatives, product innovations, and market expansions, with a focus on enhancing its financial performance in 2024 and beyond.
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Updated on 16 Nov 2024
Resources:
- Halliburton Company (HAL) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Halliburton Company (HAL)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Halliburton Company (HAL)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.