Halliburton (HAL)
According to recent analysis by UBS, Halliburton Company (NYSE:HAL) beat adjusted earnings per share (EPS) estimates in Q2 2023, reporting $0.77 per share against the investment bank's estimate of $0.73 and the Street's $0.75.
Despite an expected decline in North American (NAM) activity, management projects that demand and pricing for its higher quality services, like the ZEUS e-fleets, will remain strong.
Margins in the Drilling & Evaluation (D&E) sector are expected to increase in Q3 2023, reaching multi-year highs. With growth outlooks in international markets and NAM margin strength, UBS has raised its price target for HAL to $49 from $46.
However, UBS noted a 1% to 3% decrease in its 2023/24 adjusted EPS forecasts, mainly due to the expected expenses of HAL's SAP upgrade totalling $50 million in 2023 and $100 million in 2024/25.
Schlumberger (SLB)
Schlumberger Limited reported adjusted EPS of $0.72 per share in Q2 2023, slightly above UBS and Street's expectations of $0.71. According to UBS, the company's bottom-line beat was attributable to operating income margin expansion across all units, which offset revenue that fell below expectations. International revenue increased 5% quarter-over-quarter (Q/Q) and North American revenue grew 3% Q/Q.
Cash flow of $1 billion in Q2 2023 was better than expected, putting SLB on track for its $3 billion full-year free cash flow (FCF) guidance. UBS lowered its 2023/24 EPS estimates slightly but increased the price target to $72 from $66, reflecting increased confidence in the duration of SLB's international and offshore cycle and improved balance sheet.
Baker Hughes (BKR)
Baker Hughes Incorporated (NYSE:BHI) beat UBS's Q2 2023 adjusted EPS expectations with $0.39 per share compared to UBS's estimate of $0.34 and Street's $0.33. Despite revenue coming close to the guidance midpoint, earnings before interest, tax, depreciation, and amortization (EBITDA) topped the high end of guidance.
UBS's report mentioned initial Q3 2023 guidance from BKR projecting 5% Q/Q growth in revenue and EBITDA, supported by strength in the Integrated Equipment & Technology (IET) segment. Management believes that the company's technology will maintain pricing, and strong international activity should support margins.
BKR increased its FY23 guidance by $1 billion, and UBS sees this as providing visibility to the forward outlook. UBS increased its 2023/24 adjusted EPS by 4%/2% and raised its price target to $34 from $31, reflecting greater confidence in cost-cutting initiatives and IET momentum.
And finally...
The recent UBS report paints an optimistic picture for Halliburton, Schlumberger, and Baker Hughes, with increased price targets and affirming signals on international growth and technological advancement.