Cost Cuts Propel Halliburton's Rally, but Valuation and Cycle Risks Persist

What happened

Halliburton's stock has surged, driven by effective cost-cutting measures and resilient higher-margin international equipment demand, as reported in a recent bullish article. However, the DeepValue master report reveals that management's own guidance frames 2026 as a 'rebalancing' year, with high-single-digit declines in North America revenue and flat-to-modest international growth. Filings indicate that international revenue actually fell 2% in 2025, and the promised $400 million annual cost savings are essential to offset SAP expenses and maintain free cash flow around $1.9 billion. Aggressive capex cuts of 30% for 2026 signal caution on growth, while ongoing restructuring charges mask underlying margin pressures. Thus, while operational efficiency is boosting cash flow, the broader oilfield services downturn and full valuation at ~$33-$34 limit near-term upside potential.

Implication

The focus on cost cuts and international demand obscures the reality that North America revenue is projected to fall significantly and international growth is tepid, challenging margin sustainability. For the stock to justify its premium multiples, Halliburton must deliver on its $400 million annual cost savings and keep free cash flow above $1.9 billion despite SAP drag and pricing pressures. Any failure to stabilize international revenue or a deeper slump in domestic shale could trigger margin compression and multiple contraction, eroding shareholder value. Investors should monitor quarterly results for tangible evidence of cost savings flowing through to FCF and confirm that international activity holds as guided. Given the 'WAIT' rating and attractive entry at $27, it is prudent to await either a price pullback or clear proof of durable cash flow generation before increasing exposure.

Thesis delta

The news article highlights cost cuts as a key driver, reinforcing the DeepValue report's emphasis on operational efficiency as critical for near-term performance. However, it does not alter the core thesis that Halliburton is fairly valued with limited growth catalysts, as filings guide for a cyclical reset and cost savings are already priced in. The recommendation remains to wait for a better entry point around $27 or demonstrable FCF resilience before considering a buy.