Some Concerns That Analysts Have Over Halliburton Company (NYSE:HAL)

Latest reports indicate that Halliburton Company (NYSE:HAL) is doing great. However, the stocks of the company are still being traded at comparatively low prices. What is the reason behind it? Is it because the free market has become irrational or is it because the rational metrics are going against the company? Well, the latter seems to be true given that there a lot of concerns that have arose about the stocks of Halliburton Company (NYSE:HAL). These concerns can push the stocks down. So let’s examine what these concerns are and how they are going to impact the company.

The company is not as much concerned with the energy prices as it is with the services and equipment costs, for it generates a lot of its revenues from equipment and services segment. The company, during its recent earnings call meeting, reported that its contract renewal rate has been recorded between 60 percent and 65 percent. The company expects this rate to grow even further, and it pans on pushing the future and current inflationary costs to the consumers.

The company seems to have been doing great in the services and equipment segment; it has successfully increased its share of the profit margin. However, the company is in very thin waters right now. If the prices of oil and gas continue to drop, the company will eventually lose its bargaining power. The company needs customers who require oil and gas with an upward demand curve.

Although Halliburton Company (NYSE:HAL) is doing great right now, the company hesitates to talk about its long term goals. The chief executive officer of Halliburton, David Lesar, during a recent press conference, stated that the market conditions have gone tough these days but the company will continue to outpace its competitors in the revenue growth sector. He further stated that it does not matter as to what market condition they are put into, they can take up any challenge.

Market experts are of the view that the reason the company is so certain about its revenue figures is because all or most of its contracts are signed annually. The chief financial officer of Halliburton, Mark McCollum, in a recent meeting, stated that almost 92 – 93 percent of the company’s revenues come from its contracts segment, and the rolling rate of contracts is almost 60 – 65 percent. Analysts are of the opinion that the company will face severe threats if the macro conditions in the energy sector remain weak, for it will negatively affect the company’s negotiating power.

The good news is that Halliburton Company (NYSE:HAL) expects to get a contract in the region of Iraq very soon. The estimated price of that contract is $1 billion. The bad news, on the other hand, is that the situation in Iraq can change anytime and hence it poses uncertainty.

Coming to the stock prices of Halliburton Company (NYSE:HAL), the company, on the last trading day of November 26, 2014, started its stocks at a price of $48.06 and closed at a price of $47.34.