Will Halliburton And The Oil Field Supercycle Reach New Highs?

Key Points

• Halliburton is slated to report earnings soon and analysts are upgrading the stock. 
• The oilfield supercycle is expected to gain momentum in 2023. 
• Institutional activity has the stock on the verge of a new high. 

If you are wondering about Halliburton NYSE: HAL, the oilfield supercycle and if the 2 will hit new highs, it certainly looks that way. Not only is the stock trending higher, but the outlook for earnings and the analysts’ sentiment is also trending higher. In this light, only results can stand in the market’s way and are due in about a week. 

Halliburton is slated to report earnings for calendar and fiscal Q4 on January 24th and deliver sequential and YOY growth for top and bottom-line results. The questions are if the results will be better or worse than expected, how big a margin of error there will be and what the outlook looks like.

If the company can hit a triple and produce better-than-expected earnings with a large margin of error and up the outlook, this market could easily slide up to new highs. 

The Analysts Are Driving Halliburton Higher

The analysts are driving Halliburton higher on a dual wave of rising sentiment and price expectations. The sentiment is currently pegged at a Moderate Buy, but it’s so close to a firm Buy that there’s no difference. The price target of $44.40 implies about 4.0% of upside for the stock, and it looks like this figure may have peaked out, but don’t read too much into the data. 

The consensus target has slipped ever so slightly in the month leading up to the Q4 release, but this is because of some year-old targets falling out of the data set, not any new development in the analyst sentiment.

There were a number of price target reductions in January/February 2022 that are impacting the data, but the takeaway here is bullish. The trend in price targets has only been upward since the summer of 2022, and the latest round is leading the consensus higher, not lower. Assuming the q4 results are impressive enough, this trend should continue. 

The 3 most recent analysts' shout-outs are from Goldman Sachs, Morgan Stanley and Wolfe Research. Goldman Sachs included the stock on its 50 best ROE stocks for a tough ROE year list while maintaining a Buy rating.

Morgan Stanley boosted its target to $45 from $43, and Wolfe Research double-upgraded the stock from Underperform to Outperform with a target of $51 while downgrading competitor Schlumberger NYSE: SLB. In their view, an expected increase in 2023 capital budgets should drive outsized revenue and margin growth for North American oilfield operators despite a stagnation in rig counts.

Institutional Support Is Present For Halliburton

The institutional activity has slowed from its peak in early 2022, but the institutions are still bullish on the stock. They’ve been buyers on a net basis for at least the last 5 quarters, including Q4 2022 and the 1st 2 weeks of 2023. They’ve got their total ownership up to over 80% and growing. So long as this trend continues, the stock should continue moving higher. 

Looking at the chart, there is a risk that the market is at resistance now, but the more recent price action is also bullish. This market appears to be making a Bullish Flag Pattern that could be confirmed upon the release of the Q4 results.

In that scenario, investors might expect a sharp uptick in prices that could reach the $53 level in a few days. If not, the market may become capped at the $43 level and enter a trading range.