HAL - Embedded Expectations Analysis - 2019 08 06
Halliburton Company (HAL:USA) currently trades below historical averages relative to UAFRS-based (Uniform) Earnings, with a 16.5x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may be concerned about margins, Latin America, and growth.Specifically, management may lack confidence in their ability to ramp up activities in Argentina, Guyana, and Colombia in H2 and to improve margins and returns through their stacking activity. Additionally, they may lack confidence in the sustainability of recent cementing product line activity and margin growth. Moreover, they appear concerned about sustained headwinds to Latin American revenue, and may lack confidence in their ability to drive down the unit cost of velocity guns through continued volume growth. Finally, they may be concerned about continued pushback on pricing and the sustainability of growth in their Artificial Lift business.
Halliburton assists its customers throughout the lifecycle of the reservoir, from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion and optimizing production throughout the life of the asset. The company's segments are: Completion and Production, which delivers cementing, stimulation, intervention, pressure control, specialty chemicals, artificial lift and completion products and services; and Drilling and Evaluation, which provides field and reservoir modeling, drilling, evaluation and wellbore placement solutions that enable customers to model, measure, drill and optimize their well construction activities.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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