Halliburton's Struggles Continue: Why the Stock Remains a Sell

U.S. oilfield service giant Halliburton Company HAL has had a rough ride over the past year, tumbling more than 34% and underperforming the Zacks Oil and Gas Field Services industry, which lost 11.4%, and rival SLB SLB, which is down 24.5%. The culprit? Halliburton’s heavy reliance on North America, a region facing softening drilling activity and pricing pressure. More than 40% of Halliburton’s revenues come from North America — far more than SLB’s 20% and Baker Hughes’ (BKR) 25% — leaving it more vulnerable to regional slowdowns.

HAL, SLB 1-Year Stock Performance

Image Source: Zacks Investment Research

Adding to concerns, analysts have lowered their 2025 EPS estimates for Halliburton from $2.94 to $2.63 over the past 60 days. With headwinds mounting, let’s break down whether Halliburton stock is a bargain or a value trap.
 

Image Source: Zacks Investment Research

North American Slowdown Dampens Growth

Halliburton’s reliance on North America has become a liability as industry conditions deteriorate. In 2024, the company’s North American revenues declined 8% year over year. Management anticipates another low- to mid-single-digit drop in 2025. This is largely due to lower negotiated pricing for pressure pumping services. While Halliburton remains fully contracted, weaker pricing across its fleet will weigh on first-quarter margins.

At the same time, the U.S. rig count continues to slide, with completion activity slowing and oil demand growth showing signs of weakness. Halliburton is expanding into artificial lift and completion tools to diversify its revenue streams, but these segments are not growing fast enough to counteract the broader North American downturn.

Margin Pressure Signals Profitability Challenges

Profitability is also taking a hit. Halliburton’s Completion & Production operating margin was 20% in the fourth quarter of 2024 but management expects a sequential decline of 1.75-2.25% in first-quarter 2025. The Drilling & Evaluation segment is also under pressure, with margins projected to fall another 0.5%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

The impact is already evident—Completion & Production revenues fell 4% sequentially in the fourth quarter, with operating margins slipping 49 basis points due to softer North American activity. Meanwhile, Drilling & Evaluation margins declined 44 basis points, reflecting heightened competition and rising costs.

Further complicating the outlook, Halliburton expects its tax rate to increase by 300 basis points to 25.5% in 2025, adding another layer of profitability pressure. With higher interest expenses and rising costs, Halliburton’s ability to maintain strong margins is at risk, making the stock less attractive despite its relatively low valuation.

International Growth Not Enough to Offset Weakness

Halliburton’s international business has been a bright spot, with revenues climbing 6% in 2024. However, growth is expected to stall in 2025, primarily due to a sharp activity decline in Mexico. Excluding Mexico, international revenues are projected to grow at a low- to mid-single-digit rate, which is not enough to compensate for North American headwinds.

Additionally, macroeconomic uncertainty looms. OPEC+ production cuts have provided some price stability, but any unexpected shifts in supply could trigger further volatility. Meanwhile, Mexico’s government is restructuring Pemex, aiming to reduce debt and inefficiencies—a move that could impact Halliburton’s business in the region.

Some Positives, But Not Enough to Turn the Tide

Despite these challenges, Halliburton is making strategic moves to bolster long-term growth. The company is investing in advanced drilling technology, artificial lift, and well intervention services—segments expected to generate an additional $2.5-$3 billion in revenues over the next three to five years.

Halliburton’s Zeus e-fleets and Octiv Auto Frac systems are also gaining momentum, with 50% of Zeus spreads now utilizing Octiv technology. These innovations have led to efficiency gains, with Coterra Energy reporting a 17% improvement in stage efficiency in the Permian Basin.

Additionally, Halliburton continues to generate strong free cash flow, reporting $1.1 billion in fourth-quarter 2024 and $2.6 billion for the full year. Capital discipline remains a focus, with capex held at 6% of revenues. While these factors provide some stability, they are not enough to outweigh the broader headwinds.

Final Verdict: Halliburton Stock is a “Sell’

Halliburton’s heavy exposure to North America, margin compression and slowing international growth create a challenging outlook for 2025. The downward revision in earnings estimates further reinforces concerns about weaker profitability ahead.

While Halliburton is making strides in technology and efficiency, its core business faces significant near-term risks. Given these factors, the stock does not appear undervalued enough to justify the risks, and any premium to historical lows seems unwarranted. At current levels, Halliburton remains a Zacks Rank #4 (Sell), making it a stock to avoid for now.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Names #1 Semiconductor Stock

It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.

With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research