Please ensure Javascript is enabled for purposes of website accessibility

More Energy, More Halliburton

By Stephen D. Simpson, Simpson, – Updated Nov 16, 2016 at 12:22PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The drive for energy companies to increase production is fueling Haliburton's growth.

Who do you call when you want to increase production at one of your oil wells? Perhaps Halliburton (NYSE:HAL), one of the world's largest energy services companies. With the energy boom in full swing, Halliburton is seeing increasing demand for its suite of services, and improvements in the KBR unit are helping boost profitability.

Third-quarter revenue growth of 6% probably doesn't jump out and grab you. Half of the business, energy services, grew the top line at 23%, but the other half, KBR, saw revenue decline 7%. Although consolidated revenue growth wasn't torrid, operating income growth of more than 100% is nothing to cry about.

The energy services group saw operating income climb 37% despite the impact of the Gulf Coast hurricanes in the quarter. Demand for the company's services was strong across the board, with good growth in drilling and evaluation, fluid systems, and production optimization. In the latter case, there was especially strong demand for well stimulation. This is good news for Halliburton, which leads Schlumberger (NYSE:SLB) and BJServices (NYSE:BJS) in pressure pumping, but it should also be good news for CARBOCeramics (NYSE:CRR), a leading supplier of the proppants used in some types of well stimulation.

KBR continues to be a mixed blessing. While it is still something of a drag on overall performance, the company seems to be turning it around nicely. Though revenue was down, operating income of $150 million reversed the year-ago loss. This unit should benefit from more LNG (liquefied natural gas) projects and the lessons of mistakes past, but I would still expect to see it spun off or sold at some point in the next year.

Although Halliburton trails Schlumberger in most categories, there's plenty of business to go around. In fact, business in the energy services group is strong enough that the company will be pushing through price increases ranging from 6% to 18%. That might be bad news for energy companies, but so long as oil and natural gas prices stay high, they'll pay it.

In the longer term, this is still a cyclical business, even if this particular cycle lasts longer than people currently expect. Accordingly, the stock's near-term movements will more closely follow the day-to-day jiggles in oil prices than they probably should. While I'm not so keen on the stock for the long haul, these are certainly happier days for Halliburton right now.

More crude Fool Takes:

The Motley Fool has kicked off its ninth annual Foolanthropy campaign! Nominate your favorite charities on our Foolanthropy discussion board through Nov. 1. For guidelines on what makes a charity Foolish, visit www.foolanthropy.com .

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).

None

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Schlumberger Limited Stock Quote
Schlumberger Limited
SLB
$35.00 (-8.45%) $-3.23
Halliburton Company Stock Quote
Halliburton Company
HAL
$24.58 (-8.69%) $-2.34
CARBO Ceramics Inc. Stock Quote
CARBO Ceramics Inc.
CRR

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.