Power Generation And Data Center Exposure Will Shape Future Risk And Reward

Key Takeaways

• Strategic technology advancements and international expansion are strengthening service differentiation, supporting higher margins and more stable, recurring revenues.
  
• Rising global energy needs and decarbonization trends are reinforcing demand for Halliburton's key offerings, offsetting regional softness and reducing earnings volatility.
  
• Structural challenges from energy transition, regulatory pressures, and market overreliance threaten sustained revenue growth, profitability, and competitiveness without swift diversification and innovation.

Catalysts

Provides products and services to the energy industry worldwide.

• Global energy demand is projected to rise due to persistent population growth and energy needs in developing economies, creating a long-term tailwind for oil and gas investment which should drive sustained revenue growth for Halliburton's core services despite current market softness.
  
• The increasing role of natural gas as a bridge fuel in global decarbonization is supporting stable upstream and midstream activity-Halliburton's strong project wins in international unconventionals and production services position the company to capture this trend, underpinning revenue and improving earnings visibility.
  
• Industry necessity to replace production from naturally declining oilfields is intensifying demand for well intervention, stimulation, and enhanced recovery services-areas where Halliburton is demonstrating growth (e.g., expanding international artificial lift and intervention contracts), which should support margin resilience even as North American markets soften.
  
• Halliburton's expansion and adoption of proprietary digital and automation technologies (e.g., ZEUS IQ, iCruise, LOGIX, EarthStar 3DX) are enabling higher-margin, differentiated offerings; increased deployment and customer adoption, especially internationally, has potential to structurally improve net margins and recurring revenues over the medium to long term.
  
• The company's ongoing international diversification-growing faster in regions like Latin America, Africa, and the Middle East, and leveraging U.S.-style unconventional expertise-creates a larger, more stable revenue base and reduces earnings cyclicality, supporting both top-line growth and improved earnings predictability.

Halliburton Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Halliburton's revenue will decrease by 0.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.4% today to 9.0% in 3 years time.
• Analysts expect earnings to reach $2.0 billion (and earnings per share of $2.51) by about September 2028, up from $1.9 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $2.4 billion in earnings, and the most bearish expecting $1.6 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.2x on those 2028 earnings, up from 10.0x today. This future PE is lower than the current PE for the US Energy Services industry at 15.0x.
• Analysts expect the number of shares outstanding to decline by 2.95% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.47%, as per the Simply Wall St company report.

Halliburton Future Earnings Per Share Growth

Risks

• Intensifying global decarbonization efforts, stricter emissions regulations, and increasing investor pressure to reduce fossil fuel exposure could structurally dampen long-term demand for Halliburton's core oilfield services, resulting in lower revenues and growth prospects.
  
• The ongoing acceleration of renewable energy adoption and technological advancements in energy storage threaten long-term capital flows to upstream oil & gas, gradually eroding Halliburton's primary market and potentially reducing earnings and cash flow.
  
• Overdependence on North American shale markets exposes Halliburton to cyclical downturns, pricing pressures, and market volatility-illustrated by current and forecasted declines in U.S. drilling and completion activity-likely compressing revenues and net margins.
  
• Persistent legal, trade, and environmental headwinds, such as rising tariffs (notably impacting the artificial lift segment), potential litigation, and regulatory costs, will increase operating expenses and could negatively impact net income.
  
• Risk of underinvestment or delayed execution in diversifying into lower-carbon and digital technologies could result in revenue stagnation or decline as oilfield service demand contracts over the long run, putting further pressure on profitability and market share.

Valuation

• The analysts have a consensus price target of $26.542 for Halliburton based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $35.0, and the most bearish reporting a price target of just $20.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $22.1 billion, earnings will come to $2.0 billion, and it would be trading on a PE ratio of 13.2x, assuming you use a discount rate of 8.5%.
• Given the current share price of $21.75, the analyst price target of $26.54 is 18.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.