Halliburton-On the rise? Message Board

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Gold/Mining/Energy : Halliburton-On the rise?

HAL 26.84

-0.4%

Oct 31 9:30 AM EST

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From: Dennis Roth	10/24/2007 8:49:23 AM
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Halliburton Company (HAL): Expect discount to peers to further narrow; raising estimates - Goldman Sachs - 10/23/07 What's changed Adjusted EPS of $0.66 came in above our and consensus of $0.64. Outperformance was driven by North America where operating income improved 9.2% qoq and Eastern Hemisphere where operating income increased 16.1% qoq. Margins grew sequentially in all geographies with the exception of Latin America. Detailed comparisons with our estimates are difficult due to Halliburton's new disclosure structure. We raised our 2007/2008/2009 EPS forecasts by $0.09/$0.03/$0.07 to $2.51/$3.10/$3.62. Implications (1) We continue to view HAL as one of our favorite Neutral-rated stocks and raised our 12-month price target to $46 (=11.8X 2008 EV/DACF) from $44 due to higher estimates and confidence in international growth. (2) Although both HAL and SLB beat 3Q EPS estimates by similar magnitude, we believe that investor expectations are higher for SLB and expect to see its premium to HAL further narrow over the coming weeks. HAL's income from the International market is also becoming a larger percentage of the overall business (40% in 2006 versus 54% in 2008), which should result in multiple expansion, in our view. (3) HAL reported better than expected revenues and margins in NAM with weaker stimulation pricing offset by higher utilization. We lowered our expectations for HAL's NAM business in 2008; however, better than expected growth in the international business was more than offsetting. (4) HAL posed strong E. Hemisphere revenue growth of 45% yoy and margins improved yoy to 23.9% from 21.3%. We expect HAL's international business to continue to drive upside. Valuation Halliburton is trading at a 2008 EV-DACF/P-E of 10.3X/12.7X versus the Schlumberger of 14.2X/18.4X. Key risks Key risks include capacity additions, a sustained decline in commodity prices and the broader stock market indices.

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