Monday, July 29, 2013


Halliburton (HAL) has had a rocky time in the public relations department ever since the 2010 Gulf of Mexico oil spill but that doesn’t seem to have rankled investors too much even with the latest revelation that the company destroyed evidence related to the Deepwater Horizon explosion and subsequent oil spill.

Halliburton is one of the world’s largest providers of products and services to the energy industry.  The company serves the upstream oil and gas industry from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field.

Thursday July 25th, the Justice Department announced that Halliburton has agreed to plead guilty to destruction of critical evidence after the Gulf of Mexico oil spill in 2010.  The oil services company said it would pay the maximum allowable fine of $200,000 and will be subject to three years of probation.

The Justice Department said Halliburton had recommended to BP, the British oil company, before the drilling that the well include 21 metal centralizing collars to stabilize the cementing. BP chose to use six instead. During an internal probe after the accident, Halliburton ordered workers to destroy computer simulations that showed little difference between using six and 21 collars, the government said, after which the company continued to say that BP was neglectful to not follow its advice.

While Halliburton’s stock dipped slightly following Thursday’s announcement, it surged nearly $2.00 in early trading on Friday.  This might signal investors willingness to overlook the company’s indiscretions in favor of profits.

2013 QE2
On July 22 Halliburton released their second quarter 2013 earnings information.

Income from continuing operations for the second quarter of 2013 was $677 million, or $0.73 per diluted share. This compares to income from continuing operations for the first quarter of 2013 of $624 million, or $0.67 per diluted share, excluding a $637 million charge, after-tax, or $0.68 per diluted share, to increase a reserve related to the Macondo litigation.

Halliburton's total revenue in the second quarter of 2013 was a company record of $7.3 billion, compared to $7.0 billion in the first quarter of 2013. Operating income was $1.0 billion in the second quarter of 2013, compared to operating income of $902 million in the first quarter of 2013, adjusted for the Macondo charge. For the first quarter of 2013, reported loss from continuing operations was $13 million, or $0.01 per diluted share, and reported operating loss was $98 million.

“I am pleased with our second quarter results, as total company revenue of $7.3 billion was a record quarter for Halliburton,” commented Dave Lesar, chairman, president and chief executive officer.

“For the third quarter, we anticipate the U.S. land rig count to be flat. We are observing a continuing trend towards multi-well pad activity among our customer base, which we believe will result in higher service intensity. Ultimately, we believe this efficiency trend bodes very well for us, as our scale and expertise allows us to lead the industry in executing factory-type operations. We also expect North America margins to continue to expand over the balance of the year.  We continue to be optimistic about Halliburton’s performance for the remainder of 2013, our ability to continue growing our North America margins, and continued revenue and margin expansion in our international business. We are relentlessly focused on delivering best-in-class returns. Our recent quarterly dividend increase, aggressive stock repurchases, and our $5 billion stock repurchase authorization reflect our growing confidence in the strength of our business outlook,” concluded Lesar.

Tuesday, July 02, 2013

Is it Time to Sell Blackberry?

Investors and consumers alike have been speculating about the health of Blackberry (BBRY) for quite some time now, and for good reason.  With the latest earnings information it might be time for you to reevaluate your positions in Blackberry.  An editor’s pick on has distilled this information into a quick and easy reference that we have listed for you here.  Click here to read the original article.

BlackBerry (BBRY) this morning reported its Q1 2014 fiscal year earnings. This is a bomb of a report. The company did not release the total number of BB10 units sold. The EPS number was negative and missed expectations. The only positive at all is the company continued to build its cash which will support the stock, but at what price? BlackBerry has traded down over 15% in pre-market trading. The earnings call will be more critical than ever for BlackBerry. Tune in to it before you trade today.

Earnings Highlights
Diving into the earnings report here are the critical figures, their context, and a quick take on how I am interpreting each figure and how the Street might interpret each:

BB10 Unit Sales
  • Q1 2014 - WHO THE HECK KNOWS
  • Q4 2013 - ~1M units
  • Variance - ?????
o Grade: F - If BlackBerry does not report the BB10 unit sales as part of its earnings call, I would tell you that I would be very scared to own this stock going forward. Even if they do report these sales, they appear to have missed expectations.

BlackBerry Phone Unit Sales
  • Q1 2014 - ~6.8M units
  • Q4 2013 - ~6M units
  • Incr / (Decr) - .8M units up 13%
o Grade: F - BlackBerry sold 1M BB10 units in Q4 2013 out of 6M total units. I have seen very few estimates of less than 3M BB10 units for Q1 2014. For this to have happened, the company would to have had a mix of older phones of about 3.8M units and 3M BB10 units. That could be possible, but it is not likely. I do not see how any bull will be able to spin this number.

Total Revenue & Gross Margin %
  • Q1 2014 - $3.1B and 33.9%
  • Q4 2013 - $2.68B and 40.1%
  • Incr / (Decr) - $.42B and (620bps)
o Grade: D - Gross margin is the more important of the two figures. The company reported that Gross Margin % was negatively impacted by 200bps from a non-recurring item. Even still, the drop from Q4 2013 is still material. Why? The company will have to explain this on the conference call and I just do not think there will be a good answer.

Service Revenue
  • Q1 2014 - $806M and 26%
  • Q4 2013 - $964M and 36%
  • Incr / (Decr) - ($158M)
o Grade: C - The reported number is $72M lower than a normalized number due to a one time (hopefully?) foreign currency issue in Venezuela. Even when adding the $72M back to the reported number, the drop was 9% from the last quarter. Thorsten Heins provided guidance of a single-digit drop on the last conference call, but seeing the drop being as high as 9% is very concerning.

Cash and Equivalents
  • Q1 2014 - $3.1B
  • Q4 2013 - $2.9B
  • Incr / (Decr) - $.2B
o Grade: A+ - At some point in time, it will be hard to give BlackBerry an A for just maintaining its cash. The company needs to sell phones and it is struggling mightily to do this. This cash should support the share price, but it might not provide support until shares have fallen 20%.

North America
The only slight operating positive is that the company generated an increase in revenues from North America on a sequential basis and appears to have stopped the bleeding in this critical region for the time being.

Outlook Going Forward
The outlook going forward took a turn for the worse this morning. The earnings conference call should be a complete cluster and management is going to be on the defensive. If the company cannot give a reasonable reason for why BB10 sales appear to be so low, or does not disclose this number, the selling pressure will be immense. Even if the number is disclosed, this report has much more fodder for the bears than the bulls.