Halliburton (HAL) to cut ties with KBR
Politics aside, Halliburton today announced they will sell the remaining ownership of KBR (thestreet.com, 2007). As you might recall, Halliburton did an IPO of their KBR unit late last year, but still owned 80 percent of the company. As expected the board has decided to sell the rest. This should fetch the company (HAL) a hefty load of cash. On this news, KBR is up 7 percent and HAL is up slightly, trading now at almost $32 per share.
The last time we wrote about Halliburton, the stock was trading at $29 per share and oil was in the mid $50 per barrel. We encouraged folks to consider buying HAL as it was undervalued. It you had bought it at $29, you are probably smiling today. Even though HAL is at $32 per share, we believed this stock has not yet reach its full potential. The main reason for our bullish view is we believed oil will continue to trade high. Our prediction is oil will trade $50-$65 per barrel for the remainder of this year.
After HAL fully spin-off KBR in April, they will be flushed with cash and will need to do something with all that money. It is our prediction they will use some of the proceed to buy back shares and increase their dividend payout. If they decide to return the money to shareholder in this manner, HAL should be trading in the high 30s. Our 12 month price target for HAL is $45 per share.
