Shares of oilfield firm Halliburton Co fell sharply yesterday after the company forecast lower revenues in key business areas next quarter, overshadowing a quarterly profit beat and a pledge to reduce 2019 spending.
Clients in North America, Halliburton’s biggest market by revenue, began pulling back on some drilling services last year amid transportation bottlenecks in the largest US production region and after oil prices slid sharply in the fourth quarter.
An oil glut and concerns about a global economic slowdown have pushed US crude futures down about 30% since October to around $53 a barrel.
The company anticipates mid- to high-single digit revenue declines in its Completion and Production and its Drilling and Evaluation divisions next quarter.
Halliburton said it will reduce its 2019 capital spending budget by nearly 20% to $1.6bn.
Further reductions could be made if market conditions erode, executives said on the company’s fourth quarter earnings call.
Although Halliburton beat profit expectations, Wall Street analysts questioned chief executive officer Jeff Miller during the call on the lack of investor returns from the oilfield service sector, which has struggled to recover from the 2014 downturn in oil prices.
Halliburton’s share price in December fell to its lowest level since 2010, trading under $25.
Houston-based Halliburton said revenue from North America fell about 2% to $3.3bn from a year earlier and dropped 11% from the third quarter.
International revenue rose to $2.6bn from $2.5bn from a year earlier.
It rose 7% from the third quarter.
“In North America, the demand for completions services decreased during the fourth quarter, leading to lower pricing for hydraulic fracturing services,” Miller said in a statement.
The number of active hydraulic fracturing fleets in the Permian basin fell to 140 in January, versus 192 in June of 2018, a 27% decline, according to data from consultancy Primary Vision.
Halliburton’s international business “continues to show signs of a steady recovery,” Miller added.
The company saw an increase in demand for services in Argentina, which help offset some lower activity in North America.
Halliburton said net income attributable to the company was $664mn, or 76 cents per share, for the fourth quarter ended December 31, compared with a loss of $824mn or 94 cents per share, a year earlier.
Excluding one-time items, the company earned 41 cents per share, beating analysts’ estimates of 37 cents per share, according to IBES data from Refinitiv.
Fourth-quarter revenue was largely flat at $5.94bn.
UBS warned of a tough start to 2019, after reporting an outflow of funds from its flagship wealth management business at the end of last year, sending a shiver through the European banking sector.
UBS is the first major European bank to report fourth quarter earnings, and shares in rivals Credit Suisse and Deutsche Bank fell as investors fretted over similar news from them next month.
UBS’s pivot to focus more on managing money for the world’s rich and less on volatile areas of investment banking over the past six years or so had made it one of the most stable performers among large European banks.
But the fall in earnings shows its private banking business is not immune to market swings, with much of its earnings dependent on clients’ willingness to invest.
“Of course in the current environment when you see trading in investment banking perform less, you see wealth management also having its issues with money and net new money figures,” chairman Axel Weber said in an interview on Bloomberg TV, “but by and large this is a stable fee-earning business.”
Overall, UBS generated $862mn in fourth-quarter pre-tax earnings, missing analyst expectations for $985mn in the consensus provided by the bank.
The Zurich-based lender, which manages more than $2tn of the world’s wealth, posted a 22% dip in fourth-quarter adjusted pre-tax earnings in wealth management as clients reduced risk in their portfolios, traded less and built up their cash positions.
The unit saw $7.9bn in net new money outflows, a closely watched metric of future earnings.
Chief executive Sergio Ermotti said UBS should be able to get back to bringing in fresh money, with the bank reaffirming targets to grow wealth management’s pre-tax profit at the upper end of a 10-15% target over 2019-2021.
Ermotti said in October he had no doubt the bank could deliver superior and sustainable shareholder value, regardless of market conditions, but yesterday acknowledged its path to hitting its return on capital and cost-income targets for the year had become “steeper”.
The investment bank also had a torrid quarter with a fall in earnings in its trading, capital markets and advisory businesses.
In equities, usually an area of strength, UBS posted a 13% drop in earnings from a year earlier, bucking the trend seen at US banks last week which largely had a strong quarter for stock market trading.
The bank proposed a dividend of 0.70 Swiss francs for 2018, up from 0.65 Swiss francs the prior year, and said it aimed to buy back up to $1bn in shares in 2019.
IG Group Holdings
Shares of IG Group Holdings Plc fell 12% yesterday after the online financial trading company reported a slump in first-half earnings as new regulations made it harder for some clients to use its trading platforms.
The mid-cap company has seen customer numbers fall after tighter rules in Britain and the European Union for products on which previously anyone with a bank card could make highly-leveraged bets through apps and online platforms.
Shares in rivals Plus500 Ltd and CMC Markets also fell after IG’s results.
IG, which provides online stockbroking and trading services to retail and other investors, saw a 15% drop in active clients in both the United Kingdom and the EU.
Pretax profit fell to £113mn ($146mn) in the six months ended November 30 from £136.2mn a year earlier, said IG, which was the world’s first spread-betting firm when it started in 1974 with just three employees.
“Since those measures have been introduced, we have seen a reduction in the volume of trading... We expected that to happen but that impact has been more significant than we anticipated,” chief financial officer Paul Mainwaring said of the new regulations.
IG’s net trading revenue tumbled 6.5% to £251mn. “IG has experienced significant change and will continue to do so in the future.
Change will be driven by regulation, by shifting patterns of wealth and by the continued development of financial markets around the world,” chief executive officer June Felix said in a statement.
The company said it expected revenues in the full financial year to fall, and added the “exceptional performance” in previous year’s second half was driven by interest in cryptocurrencies.
“The outlook statement from the new CEO speaks of adapting and thriving in an evolving market, but the company is not replacing the revenues it is deriving from its existing customers,” Liberum analyst Ben Williams said.
Online trading platforms have been focusing on their professional clients as the new regulation takes a toll on their retail customer base.
IG said professional clients accounted for about 69% of its revenue from the region regulated by the European Securities and Markets Authority.
EasyJet lost £15mn ($19.3mn) in the 36 hours of travel chaos sparked by drones flying into London’s Gatwick Airport in December, the budget airline said yesterday.
The British company, the largest operator at Britain’s second biggest airport, said the disruption affected 82,000 customers and forced the cancellation of more than 400 of its flights in the run up to Christmas.
That knocked around £5mn off its revenue and cost the airline 10mn pounds to help its customers.
However, the group gave an otherwise upbeat trading update and said 2019 bookings were encouraging despite uncertainty around Brexit, striking a more positive tone than rival Ryanair, which issued a profit warning last week.
“We feel that this environment is robust and solid, and we do well in it,” chief executive Johan Lundgren told reporters.
Gatwick was forced to close its runway in December when drones flew near the site south of London in the most disruptive incursion by unmanned aerial vehicles at any major airport.
It forced the cancellation or diversion of around 1,000 flights, affecting 140,000 passengers over three days in total.
Analysts at RBC said they had trimmed their profit-before-tax forecast for easyJet by 3% as a result of the Gatwick disruption, but retained their “outperform” rating as “far worse” earnings cuts were already priced-in.
EasyJet said it had enjoyed a good operating performance with the exception of the Gatwick disruption and took a different view of the market from Ryanair, which warned lower than expected winter air fares would hit its full-year profit. EasyJet said it expected full-year headline profit before tax broadly in line with current market expectations.
Total revenue rose by 13.7% to £1.3bn in its fiscal first quarter to December 31, after passenger numbers rose by 15.1% to 21.6mn.
“Second half bookings continue to be ahead of last year,” Lundgren said.
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