TipRanks Smart Value #25: Value Wells
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Dear Investors,
Dear Investors,
Welcome to the 25th edition of our recently launched TipRanks Smart Value Newsletter!
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This Week’s Top Value Pick: Halliburton (HAL)
Halliburton (HAL) is a leading global oilfield services company providing products and solutions for the exploration, development, and production of oil and natural gas. The company operates across the upstream value chain, offering technologies in drilling, evaluation, completion, production, and reservoir management to maximize hydrocarbon recovery and efficiency. With a broad international footprint and expertise in both conventional and unconventional resources, Halliburton leverages innovation, scale, and integrated service delivery to help energy producers optimize performance and reduce costs.
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Innovation Legacy
Halliburton’s story dates back to 1919, when founder Erle P. Halliburton established the company in Duncan, Oklahoma. He pioneered a new method of cementing oil wells that improved well integrity and productivity, laying the foundation for a business that would become central to the oilfield services industry. Over the following decades, Halliburton steadily expanded across the United States and then into international markets, becoming one of the first service providers to establish a presence in Europe, the Middle East, and Latin America.
The 1990s marked a major period of transformation. Halliburton diversified beyond its core offerings through strategic acquisitions, most notably the 1998 merger with Dresser Industries. The deal broadened its technology portfolio, global footprint, and service capabilities, cementing its status as one of the world’s largest integrated oilfield service companies. Although Halliburton later streamlined by divesting non-core businesses, the transaction underscored its largescale ambitions.
In the 2000s, Halliburton capitalized on North America’s shale revolution, leveraging its expertise in hydraulic fracturing1, horizontal drilling2, and unconventional well completions.3 These capabilities positioned the company at the center of the unconventional resources boom, driving significant earnings growth during a surge in oil and gas investment. At the same time, Halliburton expanded into digital technologies and real-time reservoir evaluation, further strengthening its competitive edge.
The 2010s brought both growth initiatives and challenges. Halliburton pursued consolidation through a proposed acquisition of Baker Hughes in 2014, which would have reshaped the oilfield services landscape. The deal was ultimately blocked in 2016 on antitrust grounds, but it underscored the company’s drive to expand scale and capabilities. In the years that followed, Halliburton placed greater emphasis on efficiency, capital discipline, and integrated service models to preserve profitability during volatile commodity cycles.
In recent years, the company has sharpened its focus on digital solutions, automation, and sustainable energy services, while expanding in key international markets. Its ability to capture rising North American demand alongside international growth supported its earnings rebound after the COVID downturn of 2020.
Today, Halliburton operates in more than 70 countries, has a market capitalization of nearly $19 billion, and generates trailing twelve months’ revenues of $22.2 billion. The company is ranked #194 on the Fortune 500 list, and it remains a global leader in oilfield services, defined by a century of innovation and scale.
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1- Hydraulic fracturing (fracking) involves pumping high-pressure fluids into the rock to create fractures, enabling oil and gas to flow.
2-Horizontal drilling and multi-stage fracturing is defined as extending wellbores horizontally through resource-rich rock layers and dividing them into multiple stages for targeted fracking, which maximizes recovery.
3-Well completion is the stage after drilling a well, when it is prepared so that oil or gas can safely and efficiently flow from the reservoir to the surface. Unconventional well completion refers to the process of preparing and equipping wells that tap into unconventional resources, such as shale oil, tight gas, and coalbed methane, so they can safely and efficiently produce hydrocarbons.
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Merger Momentum
Halliburton’s mergers and acquisitions strategy has shifted over time, balancing large-scale deals with targeted technology buys and strategic divestitures. Each step has influenced its earnings trajectory and reinforced its solid standing in the oilfield services sector.
A major turning point came in the late 2000s when Halliburton spun off KBR, its engineering and construction subsidiary. The divestiture marked a deliberate move to sharpen its focus on upstream oilfield services, redirecting capital and management resources toward higher-margin businesses in drilling, completions, and production.
In 2014, Halliburton launched its boldest move yet, a $34.6 billion bid for Baker Hughes, aimed at unlocking cost synergies, scale efficiencies, and a stronger global footprint. The company even lined up $5 billion in divestitures to appease regulators, but antitrust hurdles eventually scuttled the deal in 2016. Though unsuccessful, the attempt underscored Halliburton’s growth ambitions through scale and integrated services.
After the failed merger, Halliburton pivoted towards smaller, tech-focused acquisitions to drive margin growth. In 2017, it bought Ingrain, a rock analysis firm that enhanced drilling efficiency and well placement within the Drilling and Evaluation segment. A year later, it acquired Athlon Solutions, expanding into specialty chemicals for water and process treatment — adding a recurring, higher-value revenue stream that strengthened cash flow stability. Key recent milestone came in 2024 with the acquisition of the Norway-based Optime Subsea, a specialist in umbilical-less subsea technology. Umbilical-less subsea technology refers to a new generation of offshore oil and gas production systems that operate without the traditional subsea umbilicals4. The deal enhanced Halliburton’s Testing and Subsea business by introducing innovative, cost-efficient intervention and completion solutions. These offerings include well testing, fluid analysis, subsea safety systems, and advanced optimization tools, strengthening the company’s ability to serve offshore markets. Management sees Optime as a catalyst for long-term earnings growth by expanding higher-margin, technology-led services.
Collectively, these acquisitions and divestitures have sharpened Halliburton’s technological edge, diversified its service mix, and reinforced its earnings profile. By blending scale with targeted innovation, the company has positioned itself as one of the most competitive and resilient players in global oilfield services.
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4- Traditional subsea umbilicals are the long-bundled cables and hydraulic lines that connect subsea equipment on the seafloor to a surface facility or platform.
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Energy Essentials
Halliburton operates one of the world’s largest oilfield services businesses, supporting every stage of upstream energy development, from drilling to production. Its operations are organized into two main segments: Completion and Production (C&P) and Drilling and Evaluation (D&E). Together, these businesses provide a diversified earnings base, tied to both North American shale activity and longer-cycle international investment. C&P provides services and products that help prepare wells, boost output, control pressure, and keep oil and gas flowing efficiently. This includes services like pressure pumping, well completions, and production enhancement.
Halliburton’s ability to scale technology and services across global markets is the pillar of its business model. The company leverages advanced completion techniques, digital solutions, and automation to help customers lower well costs and increase recovery rates, which in turn drives higher service intensity and margins. Its integrated service offerings also enable the company to capture greater wallet share per project, supporting revenue growth even in volatile commodity price environments.
C&P is the company’s largest division and primary revenue driver, delivering $3.2 billion in revenue during the second quarter, up 2% sequentially and representing about 58% of total revenue. Growth was fueled by pressure pumping in the Western Hemisphere, though this was tempered by pricing pressure in U.S. markets and lower activity in Saudi Arabia. Operating income declined 3% to $513 million, with margins slipping to 16%.
Halliburton is one of the world’s largest pressure-pumping providers. Its high-pressure fleets are equipped with advanced automation that uses algorithms and real-time data to optimize pump rates, improve fracture quality, and reduce downtime, helping preserve efficiency and competitiveness even in weaker markets. By leveraging its scale, fleet capacity, and global service network, the C&P division continues to deliver reliable solutions and sustain profitability.
D&E encompasses drilling technologies, wireline, testing, and reservoir evaluation – offering integrated solutions that improve drilling efficiency and reservoir performance. This business segment generated $2.3 billion in revenue, also up 2% sequentially, supported by robust drilling activity worldwide and comprised around 42% of its revenue. However, operating income fell 11% to $312 million as margins contracted to 13%, due to higher mobilization costs for international projects. The results highlight both the opportunities and cost challenges tied to long-cycle international work.
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Global Growth
Geographically, international operations remain Halliburton’s primary growth driver. Revenue rose sequentially by 2% to $3.3 billion, with strong contributions from Latin America, led by Mexico, Brazil, and Argentina, and from Europe/Africa, where Norway was a standout. However, momentum was offset by a 4% revenue decline in the Middle East and Asia, driven by reduced activity in Saudi Arabia and Kuwait.
In North America, revenue was sequentially flat at $2.3 billion. Completions activity was strong, but gains were offset by weaker artificial lift demand5 .
Halliburton is navigating a tough North American market marked by pricing pressure and reduced operator spending by taking deliberate steps to protect profitability and strengthen its core. Instead of chasing volumes at lower margins, the company has docked less profitable pressure-pumping fleets and is prioritizing operating equipment that can deliver solid returns, ensuring costs remain aligned with market realities. Rising expenses for labor, fuel, and equipment have added pressure, but Halliburton has responded with strict capital discipline and efficiency measures to preserve margins.
Beyond cost actions, the company is also reshaping its portfolio to focus on higher-value opportunities. It has reduced exposure to lower-return businesses like chemicals while channeling investment into areas with stronger economics, such as electric submersible pumps (ESP), which are critical for sustaining well output. This proactive repositioning demonstrates Halliburton’s ability to adapt quickly to market conditions while preparing for a recovery in demand.
Looking ahead, Halliburton expects international operations to remain its growth engine, particularly in unconventional well completions, complex drilling, production services, and artificial lift. Record unconventional well completions in Argentina, expanded production interventions in Brazil, and advanced drilling with iCruise and LOGIX automation systems demonstrate how the company’s scale and technology adoption are allowing operators to drill more efficiently and accurately in challenging reservoirs.
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5- Artificial Lift is installing equipment like electric submersible pumps (ESP) to help bring oil to the surface when natural pressure is insufficient.
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Growth Grit
Over the past three years, Halliburton has delivered steady growth, with revenues and EPS rising at a CAGR of 8.3% and 10.5%, respectively. This momentum has been fueled by stronger oilfield activity supported by recovering oil prices, the company’s investments in technology and innovation, geographic expansion, efficiency gains, and disciplined capital management.
In the second quarter of FY25, Halliburton reported revenues of $5.5 billion, a decline of 6% year-over-year though still above Street expectations. The decline in revenue was mainly due to weaker demand in both North America and key international markets, driven by softer oil prices, lower drilling and completion activity, and reduced spending by oil and gas producers. Operating income reached $727 million, translating to a margin of 13%, underscoring ongoing cost discipline despite pockets of softness in key markets.
Adjusted EPS came in at $0.55, down 31.3% from the prior year but broadly in line with consensus. The decline reflected weaker demand in North America, pricing pressure, tariff-related costs, and operational challenges tied to cautious customer spending. Tariffs alone weighed on results by $27 million during the quarter, with the impact expected to rise to $35 million, or about $0.04 per share, in Q3, a factor already embedded in the company’s guidance.
Looking ahead, management guided for modest sequential declines in both business segments in the third quarter, reflecting near-term market dynamics. C&P revenue is expected to dip 1% to 3%, with margins compressing by 150 to 200 basis points due to softer U.S. land activity and pricing headwinds. D&E revenue is also projected to decline by 1% to 3%, but importantly, margins are set to expand by 125 to 175 basis points as seasonal software demand picks up. For the fourth quarter, Halliburton expects overall revenues to hold flat to slightly softer, with typical year-end strength in D&E helping offset C&P softness.
The company has adjusted its full-year outlook to account for market challenges, with North America revenues projected to contract by low double digits and international revenues are projected to decline by mid-single digits. Even so, Halliburton’s ability to expand margins in D&E and balance regional pressures underscores its operational flexibility, positioning the company to navigate the cycle and sustain long-term growth potential. The company has reaffirmed its ability to generate $1.8 billion to $2 billion in free cash flow for 2025.
Despite near-term pressures, Halliburton’s financial foundation remains supported by strong cash generation and disciplined capital allocation. The balance sheet, while more leveraged than some peers, is manageable relative to its earnings power. As of mid-2025, the company’s debt-to-equity ratio stood at about 0.82x, a legacy of past borrowings and the capital-intensive nature of its business. Halliburton holds a BBB+ credit rating from S&P with a stable outlook – a testament to its ability to manage and repay debt.
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Undervalued Edge
Halliburton has a long track record of returning cash to shareholders through dividends, though the payout has evolved with industry cycles. The company began paying a quarterly dividend since 1972 and has maintained this policy as a central component of shareholder returns. During downturns, however, management has not hesitated to adjust payouts to preserve balance sheet strength. The most notable cut occurred in 2020, when the pandemic-triggered collapse in global energy demand forced a dividend cut, which was viewed as necessary to conserve cash during an unprecedented market shock.
As of mid-2025, Halliburton pays a quarterly dividend of $0.17 per share, equating to a payout ratio of 26.4%. The stock currently has a dividend yield of 3.05%, just below the energy sector average of 3.24%. Management has reiterated its commitment to sustaining a durable base dividend funded by free cash flow.
Alongside dividends, share repurchases have become a central pillar of Halliburton’s capital return program. In 2022, the board approved a $5 billion authorization to buy back stock opportunistically. Repurchase activity has accelerated in recent quarters, with $250 million spent in Q2 2025 alone, bringing the first-half total to $507 million. Roughly $2.5 billion of authorization remains outstanding. These buybacks not only return capital to investors but also enhance per-share earnings by reducing the share count.
Capital returns remain a top priority for management, with a stated goal of distributing at least 50% of annual free cash flow through a balanced mix of dividends and buybacks. In Q2 2025, Halliburton generated $896 million in operating cash flow and $582 million in free cash flow. While capex declined from the 2009–2014 average of 11.4%, it remained at levels necessary to support high-return technologies, with $354 million spent, around 6% of revenues. These cuts are viewed as prudent, highlighting the company’s strict capital discipline and a more efficient model.
Free cash flow also supported share buybacks, underscoring Halliburton’s commitment to shareholder returns. Notably, its adjusted return on capital employed reached 18% over the trailing twelve months, well above the peer average of 13%, reflecting the company’s strong operational efficiency.
Halliburton’s stock has struggled alongside many peers in the oil & gas industry as shares are down about 30% over the past year, pressured by weak oil prices, cautious analyst sentiment, and other headwinds. The decline has left the stock trading at steep discounts to both peers and its own history.
Halliburton trades more than 30% and 17% below the sector median on trailing and forward P/E ratios, respectively, and more than 55% and 37% below its own historical averages on the same basis. On EV/EBITDA, the stock is at a discount of over 14% to the sector median and nearly 48% below its historical average. On forward price-to-book and price-to-cash flow, discounts exceed 35% to its historical averages.
Compared to rivals such as SLB and Baker Hughes, Halliburton currently sits at the low end of the valuation range based on trailing and forward P/E ratios, forward EV/ EBITDA, price-to-book, and price-to-cash flow. This, despite Haliburton’s top-tier profitability and capital efficiency metrics. The company ranks in the top 20% of the industry on return on equity (ROE), in the top 10% on return on invested capital (ROIC), and maintains a free cash flow yield of nearly 12%, placing it among the top quartile of peers.
Analyst sentiment reflects this strength. Consensus estimates suggest nearly 22% upside potential, with some projections pointing to gains of up to 84%. Bullish views are anchored in Halliburton’s leading position in oilfield services, its financial discipline, innovation-driven strategy, and reliable capital return framework.
A discounted cash flow (DCF) analysis further supports this outlook, suggesting the stock could be undervalued by almost 50%. Together, these factors reinforce the case for Halliburton as a high-quality, cash-generating operator with meaningful long-term upside despite near-term market headwinds.
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Investing Takeaway
Halliburton presents a compelling value story for investors seeking exposure to the oilfield services sector. Despite near-term challenges from softer North American activity and pricing pressure, the company’s scale, technology leadership, and strong international presence provide a durable foundation for long-term growth. Halliburton continues to generate healthy free cash flow, enabling consistent dividends and active share repurchases that enhance shareholder value. Its share price is currently trading at a significant discount to peers and historical averages, creating an attractive entry point for value-oriented investors. For investors with patience, the company offers a blend of resilience, capital discipline, and undervalued potential.
