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Gone For A Halliburton

Halliburton earnings

Image source: ImageFlow, Maglara, IhorL - Shutterstock

What's going on?

It was a funny old Tuesday for investors in Halliburton. The American oilfield services giant reported a better-than-expected fourth-quarter profit – but its stock fell 5% after news that its core North American market shrank.

What does this mean?

The price of a barrel of oil crashed in the last quarter of 2018, thanks to both a supply glut and concerns that slowing economic growth would mean less demand for the black stuff. And the lower reward on offer for their trouble meant Halliburton’s American customers scaled back their oil-drilling activities. There was some happier news at the company’s international businesses: particularly strong demand from Argentina helped Halliburton post a cool $6 billion in overall revenue for the quarter and beat profit predictions.

Despite some recovery in recent weeks, however, the oil price (and therefore Halliburton’s forecast for performance in the first quarter of 2019) remains unattractively low. Activity in some major American oilfields is sitting 27% below what it was six months ago. We did warn you, America…

Why should I care?

For markets: Even companies should save simoleons sometimes.

Halliburton plans to reduce its “capital spending” by 20% this year. With the price of oil the decisive factor in customers’ spending plans, splashing the cash on shiny new machines and equipment can only do so much to encourage more business (tweet this). The cost-cutting was probably welcome news for investors: after bigger rival Schlumberger said last week it’d slash its own spending, its stock bubbled up 6%.

Zooming out: Healthcare’s not looking too healthy, either.

Like Halliburton, healthcare giant Johnson & Johnson reported better-than-expected quarterly results on Tuesday but saw its shares fall after offering a weaker 2019 growth forecast. The company blamed heightened competition in the pharmaceutical drugs game that makes up half of its revenues – a phenomenon others are trying to avoid by buying biotechs which create new medicines. And the ongoing cost of fighting high-profile court cases creates another element of uncertainty for investors…

Originally posted as part of the Finimize daily email.

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