Halliburton: Good Earnings, Mixed Outlook

This morning, Halliburton (HAL) posted solid fourth quarter results—37% sales growth, 47% earnings growth—beating consensus analyst views despite the political unrest in the Middle East.

These earnings were driven by strong revenue growth and increased drilling activity due to rising crude prices. And looking forward, the company expects activity to continue to accelerate in 2012.

However, margins were slightly weaker than expected and Halliburton did hint that the New Year could bring a potential rise in material, labor and logistics costs.

Halliburton is an Oil & Gas Equipment & Services Company and although I don’t recommend HAL in any of my newsletters, I do recommend several other companies in the same sector. In fact, our Emerging Growth service is heavily weighted in the best-of-the-best oil companies that are benefiting from higher crude prices and the fracking boom here in the U.S.

We’ve seen some volatility in the energy market in recent weeks due to the narrowing spread between Brent crude and West Texas Intermediate. I’ve been keeping a close eye on developments on that front, and so far haven’t noticed any major red flags.

Right now, energy stocks are a screaming buy. The ride higher will be bumpy, but the trend is firmly up. Keep in mind the roller-coaster ride that we experienced in 2011—the chaos in the Middle East culminating with the Libyan uprising, a stronger dollar and eurozone contagion fears. And I expect this volatility to continue in 2012—already we’ve seen the drama as Iran blusters about the Strait of Hormuz, where a third of the world’s oil tankers pass.

But these oscillations should be treated as buying opportunities, and looking forward I expect that oil-related holdings will surge higher as investors bid up shares in the coming months.

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