Halliburton Co (HAL) Valuation

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Company Profile (obtained from Google Finance): Halliburton Company provides a variety of services and products to customers in the energy industry. The Company operates under two divisions: the Completion and Production, and the Drilling and Evaluation segment. Halliburton Company offers a suite of services and products to customers through its two business segments for the exploration, development and production of oil and gas. In October 2008, the Company acquired Pinnacle Technologies, Inc. (Pinnacle), a provider of microseismic fracture mapping services and tiltmeter mapping services. In July 2008, it acquired the remaining 49% interest in WellDynamics B.V. (WellDynamics) from Shell Technology Ventures Fund 1 B.V. (STV Fund). In June 2008, Halliburton Company acquired Protech Centerform, a provider of casing centralization services. In May 2008, it acquired Knowledge Systems Inc. (KSI), a provider of combined geopressure and geomechanical analysis software and services.

ModernGraham Comments: None at this time.

Defensive and Enterprising Investor Tests:

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
6. Moderate PEmg ratio – PEmg is less than 20 – PASS
7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests: Score = 5/5

1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
3. Earnings Stability – positive earnings per share for at least 5 years – PASS
4. Dividend Record – currently pays a dividend – PASS
5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary:

• Last Updated    11/2/2009
• MG Value    $82
• MG Opinion    Undervalued
• Value Based on 3% Growth    $31
• Value Based on 0% Growth    $18
• Market Implied Growth Rate    2.67%
• Net Current Asset Value (NCAV)    $1.01
• PEmg    13.83
• Current Ratio    3.98
• PB Ratio    3.09

Key Data:

Balance Sheet – 9/30/2009

• Current Assets    $8,699,000,000
• Current Liabilities    $2,184,000,000
• Total Debt    $4,573,000,000
• Total Assets    $16,337,000,000
• Intangible Assets    $0
• Goodwill    $1,093,000,000
• Total Liabilities    $7,788,000,000
• Outstanding Shares    902,000,000

Earnings Per Share – Diluted

• 2009 (estimate)    $1.23
• 2008    $2.91
• 2007    $2.61
• 2006    $2.07
• 2005    $2.03
• 2004    $0.42
• 2003    $0.39
• 2002    -$0.40
• 2001    $0.64
• 2000    $0.21
• 1999    $0.20

Earnings Per Share – Modern Graham

• 2009 (estimate)    $2.12
• 2008    $2.38
• 2007    $1.91
• 2006    $1.34
• 2005    $0.86
• 2004    $0.26

Valuation History:

• 11/2/09 – Value $82, Actual Price $29.48, Undervalued & Defensive