3:49 pm ET April 25, 2023 (CFRA)

Our 12-month target of $40, down $4, reflects an 8.4x multiple of EV to projected 2023 EBITDA, in line with HAL's historical average. We lift our 2023 EPS estimate by $0.11 to $3.06 and cut 2024's by $0.11 to $3.69. Q1 EPS of $0.72 vs. $0.35 beat consensus by $0.05. Revenue ($5.7B) was up 33% Y/Y and ~2% sequentially, driven by HAL's North American exposure (+44%). In addition, HAL's international revenues saw significant revenue growth of 24% sequentially.

However, cash flow from operations ($122M) missed consensus estimates by over $300M and was weighed down by $728M in seasonal investments in working capital. Nonetheless, we think that HAL should be well positioned to benefit, most notably in its international exposure, given the reopening of China's economy and OPEC+ production cuts, which could lead to a robust acceleration in international activity and continued pricing power for HAL, assuming energy prices hold. We see HAL with free cash flow in the $1.6B range (vs. $1.4B in 2022). Shares yield 1.9%.