What Happened to Halliburton? Reading the Fiscal 4Q15 Earnings
Here come Halliburton’s fiscal 4Q15 revenues
Halliburton Company (HAL) released its fiscal 4Q15 financial results on January 25, 2016. The company recorded total revenues of nearly $5.1 billion in the fiscal quarter, but this was down by 42% from the nearly $8.8 billion recorded during its previous quarter, fiscal 4Q14. Halliburton’s revenues for the latest quarter decreased mostly due to the slowdown in its North American rig count and drilling operations.
Weighing Halliburton’s quarterly EPS against consensus estimates
Halliburton’s fiscal 4Q15 adjusted EPS (earnings per share) came in at $0.31, which was 29% higher than the consensus sell-side analysts’ EPS estimate of $0.24. Between fiscal 2Q13 and fiscal 4Q14, Halliburton’s adjusted EPS increased by 63%. But in fiscal 1Q15, the company’s adjusted EPS crashed by approximately 59% from what it saw in fiscal 4Q14. Between fiscal 1Q15 to fiscal 4Q15, its adjusted EPS fell by another 37%.
As the graph above shows, Halliburton’s adjusted EPS exceeded estimates in recent quarters. On average, Halliburton beat Wall Street estimates by approximately 9% over the past 11 quarters. Halliburton makes up about 3.1% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). Investors looking for exposure to the OFS (oilfield equipment and services) industry should bear in mind that XES has about 73% of its total portfolio in OFS.
What affected Halliburton’s reported earnings in fiscal 4Q15?
In fiscal 4Q15, Halliburton recorded a $28 million net loss. Compared to fiscal 3Q15, when the company reported a $54 million net loss, these earnings, in fact, show improvement over the previous fiscal quarter. The two biggest factors that resulted in net losses for the company include the following:
- $282 million pre-tax impairment and other charges
- $105 million pre-tax Baker Hughes acquisition-related costs
We should bear in mind as well that Halliburton’s proposed merger with Baker Hughes (BHI), as announced in November 2014, is still pending. On January 12, the European Commission initiated further review (or Phase II) into the proposed acquisition transaction.
Weighing Halliburton’s fiscal 2015 against fiscal 2014 results
In fiscal 2015, Halliburton’s revenues were $23.6 billion, which represents a 28% decline compared to the $32.8 billion the company recorded in fiscal 2014. The net losses attributable to Halliburton in fiscal 2015 reached $671 million, compared to $3.5 billion in fiscal 2014.
Now let’s discuss Halliburton’s growth drivers.
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