Halliburton Company (HAL)

The Industry: Despite the sound and fury of the alternative energy lobby/industry, there is as yet no viable replacement for fossil fuels. HAL's primary business is helping oil companies get that oil and gas (don't forget that HAL is tied to natural gas too) out of the ground. This industry isn't going anywhere for a while and oil prices look like they are going to stay in a range that makes exploration profitable (If oil stays below $40 for any length of time, my analysis is moot)

The company: HAL is right there with Wal-Mart on the daily two minutes hate list because Dick Cheney was once CEO and its KBR unit has made money in Iraq. In hindsight, KBR was a terrible acquisition for HAL and has cost both the company and its shareholders. HAL has taken years to prop up KBR so that it can be set free when a spin-off or split-off is completed later in 2007. Despite all this, the stock is up 358% since 8/1/02 - a pretty nice run.

I believe it is still undervalued, however. First of all, we know HAL currently holds 80% of KBR's 3.7b market cap, so we can subtract that from HAL's enterprise value (30b-3b) for an market value of 27b. According to the latest Annual Report, HAL's continuing ops. earned about 2.27b net, meaning that a more accurate P/E is just under 12. Compare this with its closest competitor, Schlumberger at 21. Other measures of value to compare:

EV/EBITDA HAL 6.75 SLB 12.27
EV/Sales HAL 2.08 SLB 4.10
Op. Margins HAL 26.11% SLB 25.65%

HAL's financial performance was severely compromised by KBR, which had really lousy margins. With that unit gone, HAL is likely to be valued more like its peers. If not, its a severely undervalued company in a sector with a lot of excess cash - e.g. a takeover candidate (only after KBR is gone, though).

As a caution, I suspect that two things will have to be completed before the stock can make a meaningful advance, however: the congressional show trials and the spin-off of KBR. Once these are done, HAL is more likely to be valued on its business merits.

This stock is just way to cheap to pass up. This stock is only trading at an 11 P/E! It's also trading at about HALF of next year earnings! It has been a slippery slope since its 52 week high but I think this is a kitchen sink play. This stock cannot trade at this price for long. The move may have already started up but seriously, its still a great time to get in on this one.

KBR has not been priced into the stock which equates to free money and it's just a matter of time before more money pours into HAL as more people begin to realize this. And what about the aggressive repurchase plan?

Halliburton is one of the largest diversified energy services and engineering and construction services company. It has businesses in over 100 countries worldwide with major focus in the U.S., Iraq, and the U.K.

The future of Halliburton is primarily dependent on the capital spending by the oil and gas exploration and production sector, which is likely to be positive in the years to come. Considering the high oil prices and the depleting easy oil, the need for the company’s services will see a surge in future.

The company owns a large number of patents and has substantial number of pending patent applications for its products and services. Further, it maintains an active research and development program to improve existing products and processes, and to develop new products and processes. Halliburton’s strategy of continually developing new products has placed it at a leadership position in the sector. Additionally, about one third of the company revenues are driven from new products, which will be favorable as reservoirs become more complex.

Halliburton has a strong presence in the North American market where the reserves have reached maturity and productions have started declining. Further, it faces huge risks from its operations in Iraq, which can affect its performance. However, the company is constantly diversifying its operations and venturing into new areas. The company’s technologically advanced products will demand a substantial premium placing, as it is well ahead of its peers. Considering these factors, the stock price will perform well in the days to come.

There are many people posting uninformed comments in these forums about halliburton depending on infrastructure contracts such as those in Iraq. Halliburton has completely split up from from KBR to become a pure play energy services company. This has allowed them to become more focused and keeps them far from all the perfomance of contracts related to millitary logistics or reconstruction of infrastructure.

As for the the general performance of the company, they have been very focused receantly and I know at least in the division I work in they have introduced some superior drilling and logging tools which are getting them huge volumes of work at premium rates. In some contracts they are making twice as much profit as orriginaly planned for. The company runs very lean which means they have very little wastage of resources and they have worked very hard to focus and improve their perfromance and improve the calliber of their people. I believe this is the right direction to be headed to further grow in the market.

Cons: I sometimes get the impression Halliburton runs too lean on resources and sometimes only miraculaslouslly pulls its way through.

P.S. Just because I work for Halliburton, doesnt make me biased towards them. On the personal level I actually hate them very much thank you.

I understand the concept of "peak oil" and that even with alternatives oil will run out by 2040. However, that is not the point. HAL has had a dream presidential administration for the past eight years. What can be better when the VP was your former CEO? But now that advantage is gone, and they will get taxed to the hilt like no other company when Obama gets his way. There is no greater paradigm of an Anti-Obama company than this one.

the financials on this company are too good to ignore. stock price is way too low. the oil industry as a whole is a little sluggish due to the warm winter of the Northeast. any time a company has more cash than debt, its in good shape to stick around for a long while.

dont forget also that when they sell off the rest of KBR they will have an extra $3 billion or so. its a well run and well positioned company dont let the bears scare you away. The stock gets a bad rep for no reason its a great buy low investment

As long as the US keeps starting wars in countries it can't even pronounce, Haliburton will be there to take advantage of the chaos.

Even though Halliburton stock prices have declined recently to its 52-wk low, i still feel that with its announced split of its engineering part of the company this stock is in position to rise over time.

Halliburton i think right now is undervalued...thus this split will enhance shareholder value...allowing the company to focus on its profitable business which is oil sector.

Undervalued compared to other oil services firm for no reason other than peoples hatred of Cheney. No place for emotions in stock picking.

Split will be good. If you liked the Gov. Project side - BUY KBR. This is a strong American Service company. PE is low. Cash flow and profits may stabilize as US rig count flattens, but the service sector can use a break to catch up. This stock will perform well under the democrats. Environmental restrictions will boost energy prices and Hal should have never been a "household - brand name" company. Get politics out of the way, and let HAL be valued on its balance sheet. Strong if you are bullish on energy.

Split off of low-margin KBR gives new focus & cash for technology reinvestment. Co says it will grow 20% p.a. for three years. New investments in Asian mfg and Mid-east focus of top management to where the major reserves are is a definite positive.

The worlds thirst for oil will never diminish for some time

The world needs fuel and thats all there is to say! happy investing!

This past Thursday, Senator Patrick Leahy introduced the War
Profiteering Prevention Act of 2007, which will impose stiff fines
(double gross
profits!) and prison terms (20 years!) on war profiteers. He is the
new chairman of the Senate Judiciary committee, so we'll be seeing some
action on this pronto.

More info here: http://www.dailykos.com/storyonly/2007/1/5/191835/4654

I would rather sell my grandmother's bones on ebay than invest in Halliburton.

Halliburton is going to get a rude awakening when the White House is taken by the Democrats. No more no-bid contracts or cozy deals with the government.

When the Iraq War started, Halliburton stock was over $60 a share. Botched jobs there and in New Orleans have hurt, and led to negative perception domestically. If the Dems get into office, that will also hurt since these are Cheney's bedfellows. I don't think they will get the contracts they got with the Republicans. I'm not sure how gas prices will affect things. If Halliburton can start promoting more sources of renewable energy and not be so oil-reliant, they have a chance. Also, expanding globally, such as with their pipelines could help. But I don't think they will bounce back to their previous star status. I am admittedly somewhat naiive about all this, though.

Some people love energy stocks some hate them

Oil & Gas prices can be volatile, but market overreactions to daily oil price offers an investor good buy-in opportunities as well as good profit taking points

Now separated from KBR and well positioned to take advantage of its customer's long term capital investment cycle, Halliburton will be up and down but should easily manage 50% appreciation over the next 2-3 years.

With the Bush administration out, Haliburton won't have any friends left in the white house. Considering they have one of the higher P/E ratios in their industry, I can see this stock lagging behind its competetors.