Stock Analysis & Ideas

HAL, XOM, SLB: Which Energy Stock Has More Room to Run?

Story Highlights

Major energy companies have reported strong third-quarter results so far, thanks to higher prices triggered by the supply constraints caused by the Russia-Ukraine war. Energy stocks have enjoyed a strong rally this year. We will discuss three energy stocks and see if Wall Street expects further upside.

Energy giants continue to rake in huge profits, as indicated by their recently reported Q3 results, thanks to soaring prices amid the Russia-Ukraine conflict. President Biden has been very critical of energy companies (especially about dividend hikes by companies like Exxon Mobil (NYSE:XOM)) and has urged them to boost production and bring down prices. Amid this backdrop, we’ll use TipRanks’ Stock Comparison Tool to pit Halliburton (NYSE:HAL), Exxon, and SLB (NYSE:SLB) against each other to find out which stock could offer higher upside potential even after the strong year-to-date rally.  

Halliburton (HAL) Stock

Oilfield services giant Halliburton reported stellar Q3 results as the company benefited from the surge in drilling and production amid supply constraints triggered by the Russia-Ukraine war as well as higher pricing for its products. The Q3 adjusted earnings per share (EPS) more than doubled to $0.60 from $0.28 in the prior-year quarter.

The company used the solid cash flows generated in the quarter for the early retirement of debt worth $600 million and is on track to reach its near-term leverage target of 2 times gross debt-to-EBITDA.

Looking ahead, Halliburton is optimistic that the structural demand for additional oil and gas supply will present solid tailwinds for its business.   

Is Halliburton a Good Stock to Buy Now?

Following the upbeat Q3 results, Wells Fargo analyst Roger Read upgraded Halliburton stock to Buy from Hold and boosted the price target to $52 from $33.

Read stated, “Macroeconomic headwinds may persist, but energy security and overall global oil and gas supply challenges – sanctions and lack of spare capacity – have created a sustained undersupply situation, which should sustain commodity prices and upstream investment.”

Overall, the Street’s Strong Buy consensus rating for Halliburton stock is based on 10 Buys, one Hold, and one Sell rating. The average HAL stock price target of $42.83 implies 19.1% upside potential following a year-to-date increase of 57.2%.

Exxon Mobil (XOM) Stock

Integrated oil and gas giant Exxon delivered adjusted EPS of $4.45 in Q3, reflecting a considerable jump from $1.58 in the prior-year quarter. Solid volumes, higher prices, and aggressive cost controls drove the impressive year-over-year growth in Q3 earnings. Interestingly, natural gas realizations were higher compared to Q2, while crude realizations and refining margins declined sequentially.

Thanks to its robust cash flows, Exxon distributed $3.7 billion to shareholders in the form of dividends and $4.5 billion through share repurchases in Q3. The company has repurchased $10.5 billion worth of shares year-to-date as part of its plan to repurchase up to $30 billion of shares through 2023.

Furthermore, Exxon hiked its Q4 dividend by 3.4% to $0.91 per share (payable on December 9th). This dividend hike marked the 40th straight year of annual dividend growth for the energy behemoth.

Exxon is focused on growing its low-cost production over the long term. The company is working toward meeting its 2027 plan of generating over 10% returns at $35 per barrel from more than 90% of its upstream investments.  

What is the Target Price for Exxon Stock?

Exxon stock has rallied a whopping 81% so far this year. Analysts are currently cautiously optimistic about the stock, with a Moderate Buy consensus rating based on eight Buys and three Holds. The average XOM price target of $111.09 indicates that shares are fairly valued at current levels.

SLB (SLB) Stock

Leading oilfield services company SLB’s (formerly known as Schlumberger) Q3 revenue increased 28% year-over-year to $7.5 billion, while adjusted EPS increased 75% to $0.63. Improved pricing and strong growth in offshore and international markets, coupled with continued robust levels of activity in North America, drove SLB’s Q3 performance.

SLB expects Q4 year-over-year revenue growth in the mid-20s and EBITDA margin expansion of 200 basis points.  

Looking ahead, the company projects strong demand for its equipment and services due to “constructive market fundamentals” for oil and gas, the growing focus on energy security, and the need to accelerate the energy transition to cleaner sources.   

Is SLB a Good Stock to Buy?

Following SLB’s splendid results, several analysts raised their price targets for the stock.

Citigroup analyst Scott Gruber raised his price target for SLB stock to $60 from $50 and maintained a Buy rating. Gruber believes that the stock has a “unique risk/reward within energy which the market is only now starting to appreciate.”

Susquehanna analyst Charles Minervino reiterated a Buy rating on SLB stock and increased his price target to $59 from $52. The analyst sees impressive end-market trends for the company, mainly in international markets, like the Middle East, following a strong year led by North America.

Overall, SLB scores the Street’s Strong Buy consensus rating, backed by an impressive 17 unanimous Buys. At $57.75, the average SLB stock price target implies 14.5% upside potential. Shares have skyrocketed 68.5% year-to-date.

Conclusion

While Exxon has a higher current dividend yield (3.18%) than Halliburton (1.12%) and SLB (1.19%), Wall Street’s average price target indicates further upside in the oilfield services stocks and not in Exxon.

Moreover, analysts are highly bullish on oilfield services companies based on increased activity. Much of the optimism about Exxon seems to be priced in the stock, and there are fears that the company might be impacted by a potential decline in prices due to an impending recession.

Currently, Wall Street sees slightly higher upside potential in Halliburton stock than in SLB.    

Disclosure

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