UBS Sees Soft Q1 N.A. Pricing for Halliburton (HAL), But a Higher Stock Price Over Time

March 27, 2013 11:25 AM EDT Send to a Friend
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Price: $52.92 +0.61%

Rating Summary:
    24 Buy, 7 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 37 | Down: 17 | New: 30
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UBS raised its price target on Buy-rated Halliburton (NYSE: HAL) Wednesday from $48 to $53 on higher estimates but thinks the stock will continue to tread water until potentially the 2nd-half of 2013, or Q2 at the earliest.

The firm raised 2014 EPS estimates 9% from $3.45 to $3.75 although they trimmed Q113 EPS from $0.61 to $0.56 on seasonal choppiness in Latin America (specifically Mexico and to a lesser degree Venezuela).

On pricing in North America, the firm said Q1 is soft but that's not a surprise. "In North America, Halliburton is seeing modest price softness (less than 5%) in several low technology product lines (cementing, directional drilling, and coiled tubing). However, the price declines have not been widespread, nor are they escalating. Frac pricing remains under some pressure at the spot price level, but has generally stabilized for term contracts. We had anticipated Q1 would continue to be sluggish in N.Am and expect the market to stabilize in Q2 and into the 2H-13."

Other takeaways the firm highlighted, include: (1) HAL's frac fleet is now 100% utilized, following the seasonally slow Q4 (the industry is 80% utilized, our est); (2) HAL had ~15% of its frac fleet re-priced in Q1 and renewals have been generally in-line w/ the rates seen in Q4; however there were a "few one-off instances" where HAL lowered prices to keep a large contract; (3) we are forecasting US rig count growth of 135 rigs from Q4-12 to Q4-13.

For an analyst ratings summary and ratings history on Halliburton click here. For more ratings news on Halliburton click here.

Shares of Halliburton closed at $40.13 yesterday.


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