Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Return on Sales
Return on Investment
Halliburton Co., profitability ratios
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
The profitability profile between 2014 and 2018 exhibits a significant U-shaped trajectory, characterized by a severe contraction in financial performance that reached its nadir in 2016, followed by a consistent recovery phase through 2018.
- Profitability Margins
- Gross profit margin declined from 16.25% in 2014 to a low of 5.44% in 2016, before rebounding to 12.44% by 2018. A more drastic volatility is observed in operating and net margins. The operating profit margin plummeted from 15.51% in 2014 to -42.66% in 2016, while the net profit margin fell from 10.65% to -36.27% in the same year. Both metrics returned to positive territory by 2018, with the operating margin reaching 10.28% and the net margin recovering to 6.90%.
- Return Metrics
- Return on Equity (ROE) and Return on Assets (ROA) mirrored the volatility of the profit margins. ROE experienced an extreme decline from 21.52% in 2014 to -61.25% in 2016, before recovering to 17.39% in 2018. Similarly, ROA dropped from 10.86% in 2014 to -21.34% in 2016, eventually returning to a positive 6.37% by the end of the observed period.
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Gross Profit Margin
Halliburton Co., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross profit | 2,986) | 2,265) | 864) | 2,520) | 5,340) | |
| Revenue | 23,995) | 20,620) | 15,887) | 23,633) | 32,870) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 12.44% | 10.98% | 5.44% | 10.66% | 16.25% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| SLB N.V. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenue
= 100 × 2,986 ÷ 23,995 = 12.44%
2 Click competitor name to see calculations.
The financial performance from 2014 to 2018 is characterized by a significant contraction in both revenue and profitability between 2014 and 2016, followed by a period of steady recovery through 2018. This V-shaped trend indicates a period of severe operational pressure followed by a successful rebound in margin efficiency and top-line growth.
- Revenue and Gross Profit Trends
- Revenue experienced a sharp decline from 32,870 million US$ in 2014 to a trough of 15,887 million US$ in 2016, representing a decrease of approximately 51.7%. Gross profit followed a more precipitous downward trajectory, falling from 5,340 million US$ in 2014 to 864 million US$ in 2016. Starting in 2017, both metrics showed consistent growth, with revenue rising to 23,995 million US$ and gross profit recovering to 2,986 million US$ by the end of 2018.
- Gross Profit Margin Analysis
- The gross profit margin reflects a severe compression during the first three years of the period, dropping from 16.25% in 2014 to a low of 5.44% in 2016. This decline suggests a significant increase in the cost of sales relative to revenue or a substantial reduction in pricing power. A recovery phase is observed beginning in 2017, as the margin climbed to 10.98% and further increased to 12.44% in 2018. While the recovery is evident, the 2018 margin remained 3.81 percentage points lower than the 2014 peak.
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Operating Profit Margin
Halliburton Co., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating income (loss) | 2,467) | 1,362) | (6,778) | (165) | 5,097) | |
| Revenue | 23,995) | 20,620) | 15,887) | 23,633) | 32,870) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 10.28% | 6.61% | -42.66% | -0.70% | 15.51% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| SLB N.V. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Operating profit margin = 100 × Operating income (loss) ÷ Revenue
= 100 × 2,467 ÷ 23,995 = 10.28%
2 Click competitor name to see calculations.
The financial performance between 2014 and 2018 is characterized by a severe contraction in profitability followed by a gradual recovery. A significant volatility in both top-line revenue and bottom-line operating results is evident, reflecting a period of substantial operational instability that peaked in 2016 before trending toward stabilization.
- Revenue Trajectory
- A consistent downward trend in revenue occurred between 2014 and 2016, with figures falling from 32,870 million US$ to a low of 15,887 million US$. This represents a reduction of approximately 51.6% over two years. Starting in 2017, a recovery phase began, with revenue increasing to 20,620 million US$ in 2017 and further rising to 23,995 million US$ by 2018.
- Operating Income Volatility
- Operating income experienced extreme fluctuations, shifting from a profit of 5,097 million US$ in 2014 to a substantial loss of 6,778 million US$ in 2016. The transition from a marginal loss of 165 million US$ in 2015 to a deep deficit in 2016 indicates a sharp intensification of operational losses. Profitability was restored in 2017 with an operating income of 1,362 million US$, which expanded to 2,467 million US$ in 2018.
- Operating Profit Margin Analysis
- The operating profit margin mirrored the volatility of operating income, plummeting from 15.51% in 2014 to -42.66% in 2016. This drastic decline suggests that costs remained high or failed to scale down in proportion to the rapid decrease in revenue. The subsequent recovery saw the margin return to positive territory at 6.61% in 2017 and improve to 10.28% in 2018, although the 2018 margin remained below the 2014 peak.
The overall pattern indicates a cyclical downturn and subsequent rebound. While the recovery in 2017 and 2018 demonstrates a return to operational efficiency and revenue growth, the company did not return to the high profitability levels observed in 2014 within the analyzed timeframe.
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Net Profit Margin
Halliburton Co., net profit margin calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income (loss) attributable to company | 1,656) | (463) | (5,763) | (671) | 3,500) | |
| Revenue | 23,995) | 20,620) | 15,887) | 23,633) | 32,870) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 6.90% | -2.25% | -36.27% | -2.84% | 10.65% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| SLB N.V. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Net profit margin = 100 × Net income (loss) attributable to company ÷ Revenue
= 100 × 1,656 ÷ 23,995 = 6.90%
2 Click competitor name to see calculations.
The financial performance from 2014 to 2018 is characterized by a severe contraction in profitability followed by a gradual recovery. The period began with a strong net profit margin of 10.65%, which deteriorated rapidly over the next two years before trending upward toward the end of the sequence.
- Net Profit Margin Volatility
- A sharp decline in profitability is observed between 2014 and 2016. The net profit margin shifted from a positive 10.65% to a deficit of -2.84% in 2015, reaching a critical low of -36.27% by December 31, 2016. This represents a substantial erosion of earnings, where losses in 2016 accounted for more than one-third of total revenue.
- Revenue and Net Income Correlation
- A strong correlation is evident between declining revenues and the deterioration of net income. Total revenue decreased from 32,870 million US$ in 2014 to a period low of 15,887 million US$ in 2016. This revenue contraction coincided with the transition from a net income of 3,500 million US$ to a peak net loss of 5,763 million US$ in 2016.
- Recovery Trajectory
- Starting in 2017, a reversal of the downward trend is observed. The net profit margin improved significantly from -36.27% in 2016 to -2.25% in 2017, eventually returning to positive territory at 6.90% by 2018. This recovery was supported by a steady increase in revenue, which climbed from 15,887 million US$ in 2016 to 23,995 million US$ in 2018, resulting in a return to a positive net income of 1,656 million US$.
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Return on Equity (ROE)
Halliburton Co., ROE calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income (loss) attributable to company | 1,656) | (463) | (5,763) | (671) | 3,500) | |
| Company shareholders’ equity | 9,522) | 8,322) | 9,409) | 15,462) | 16,267) | |
| Profitability Ratio | ||||||
| ROE1 | 17.39% | -5.56% | -61.25% | -4.34% | 21.52% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| SLB N.V. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
ROE = 100 × Net income (loss) attributable to company ÷ Company shareholders’ equity
= 100 × 1,656 ÷ 9,522 = 17.39%
2 Click competitor name to see calculations.
The analysis of return on equity (ROE) between 2014 and 2018 reveals a period of extreme volatility, characterized by a severe contraction followed by a significant recovery in the final year of the period.
- Profitability and ROE Correlation
- A direct correlation is observed between net income fluctuations and ROE. The period began with a strong ROE of 21.52% in 2014, supported by a net income of US$ 3,500 million. This shifted abruptly to negative values from 2015 through 2017, reflecting a period of sustained net losses.
- Analysis of the 2016 Trough
- The most significant downturn occurred in 2016, where ROE plummeted to -61.25%. This collapse was driven by a substantial net loss of US$ 5,763 million, the largest deficit in the observed timeframe, which severely impacted the return generated on shareholder investments.
- Equity Base Erosion and Impact
- Shareholders' equity exhibited a consistent downward trend from 2014 to 2017, falling from US$ 16,267 million to a low of US$ 8,322 million. This reduction in the equity base, likely resulting from the accumulation of net losses, served to amplify the volatility of the ROE during the period of negative earnings.
- Recovery and Stabilization
- A turnaround is evident in 2018, with net income returning to a positive US$ 1,656 million. This recovery, coupled with a modest increase in shareholders' equity to US$ 9,522 million, resulted in an ROE of 17.39%, signaling a return to profitability and a stabilization of shareholder returns.
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Return on Assets (ROA)
Halliburton Co., ROA calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income (loss) attributable to company | 1,656) | (463) | (5,763) | (671) | 3,500) | |
| Total assets | 25,982) | 25,085) | 27,000) | 36,942) | 32,240) | |
| Profitability Ratio | ||||||
| ROA1 | 6.37% | -1.85% | -21.34% | -1.82% | 10.86% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| SLB N.V. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
ROA = 100 × Net income (loss) attributable to company ÷ Total assets
= 100 × 1,656 ÷ 25,982 = 6.37%
2 Click competitor name to see calculations.
Between 2014 and 2018, a period of significant financial volatility is observed, characterized by a sharp decline in profitability and asset efficiency followed by a recovery in the final year of the sequence.
- Net Income Trends
- Profitability experienced a severe contraction starting in 2015. From a net income of US$ 3,500 million in 2014, the company entered a period of sustained losses, peaking in magnitude in 2016 with a net loss of US$ 5,763 million. While the loss narrowed significantly to US$ 463 million in 2017, a return to profitability was achieved in 2018 with a net income of US$ 1,656 million.
- Asset Base Fluctuations
- Total assets peaked in 2015 at US$ 36,942 million before undergoing a substantial reduction. A significant contraction occurred in 2016, with assets falling to US$ 27,000 million, representing a decrease of approximately 26.6% within a single year. The asset base remained relatively stable through 2017 and 2018, ending the period at US$ 25,982 million.
- Return on Assets (ROA) Analysis
- The ROA reflects the volatility of net earnings relative to the total asset base. A strong ROA of 10.86% in 2014 collapsed to -1.82% in 2015 and reached a critical low of -21.34% in 2016. This precipitous drop coincides with the period of maximum net loss and the sharpest reduction in assets. A recovery trend emerged in 2017 as the ROA improved to -1.85%, eventually returning to a positive position of 6.37% by 2018, although this remained below the 2014 baseline.
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