The market is about right about a gradual recovery. International contracts and cost savings should lift earnings, but weak cash collection limits the case for a higher valuation. My twelve-month target is $36.89.
Key points
- 14.5% operating margin in 2027 is my forecast, below management’s goal.
- $102 million of third-quarter 2026 cash remained after equipment spending, excluding asset sales.
- $36.89 twelve-month target supports Hold, not a bet on a drilling boom.
The call
The price requires a recovery, not a boom. At my valuation of 13 times annual earnings, today’s share price requires about $2.59 of 2027 earnings per share. Assuming 5% revenue growth, that means an operating margin, the profit retained before financing and taxes, of roughly 13.4%.
International growth offsets weaker North America ($ millions)Source: Halliburton October 20, 2026 release; geographic revenue, not customer domicile.
A partial recovery is more likely than a boom. Contract startups and lower software-installation costs support my higher margin forecast, but collections remain weak. SLB’s July results independently support international demand. The stock’s six-month underperformance against the market also argues against paying a recovery premium before execution improves.
Valuation
| Driver | My estimate |
|---|
| 2027 revenue | $23.6 billion |
| 2027 adjusted operating margin | 14.5% |
| 2027 adjusted net income | $2.33 billion |
| 2027 adjusted earnings per share | $2.84 |
| Earnings multiple at target | 13 times |
| Twelve-month target | $36.89 |
My earnings estimate allows for financing costs, a normal tax rate and modest share repurchases; adjusted earnings exclude exceptional charges, not employee stock compensation. Thirteen times earnings recognizes international growth without a separate energy-security premium. A weaker recovery could put the shares near $31, leaving insufficient upside for a Buy.
The margin recovery decides the share value ($ per share)Analyst scenarios: 2027 revenue $23.6bn, 13 times earnings; October 20, 2026.
Risks
- Customer spending could weaken despite expensive oil; watch finalized 2027 budgets and completion activity rather than spot prices alone.
- Savings could be consumed by startup costs and Middle Eastern inflation; watch operating margins and repeated restructuring charges.
- Reported profits could fail to become cash; watch receivables, inventory and fourth-quarter collections before assuming larger repurchases.
What would change my mind
Sustained operating margins above 15% alongside falling receivables and inventory by September 2027 would justify a higher earnings estimate and a more positive rating.
