Earlier this month, Halliburton Co. (NYSE: HAL) and Baker Hughes Inc. (NYSE: BHI) were forced to terminate their merger plans because they were unable to secure an approval from the U.S. Department of Justice. However this is not the end of the story. Both companies did lose their merger premiums after this was handed down, although it was not a huge move for either stock.

At this point, many investors might sour on these companies in the face of a failed merger, but one independent research firm sees about 20% to 25% upside in Halliburton.

Argus maintained a Buy rating and raised its price target to $48 from $38. Despite the failed attempt to acquire Baker Hughes, the firm believes that Halliburton remains better positioned than most peers to take advantage of new technology in the North American land market. Argus also believes that this market is also likely to see the greatest upside when oil prices and capital spending by exploration and production customers begin to recover.

The two companies were unable to propose an asset divestiture plan that would gain Justice Department approval, and they also faced pressure from an unprecedented decline in oilfield service activity. Under the terms of the deal, Baker Hughes will receive a $3.5 billion termination fee from Halliburton.

Looking ahead, Argus expects Halliburton to take steps to boost revenue and market share, lower costs and expand margins. Despite the failure of the Baker Hughes merger, the firm believes that the company is well positioned to take advantage of an energy price recovery given its strength in the U.S. onshore market.

Just after the merger news, Halliburton reported its first-quarter earnings from continuing operations of $64 million or $0.07 per share, down from $418 million and $0.49 per share in the same period last year. Earnings missed the Argus estimate of $0.14, but topped the consensus of $0.04. The sharp decline in operating profit was driven by lower crude oil prices, falling contract pricing and lower rig activity. Total first-quarter revenue fell 41% from the prior year to $4.198 billion.

Shares of Halliburton traded down 1% to $39.89 on Thursday, with a consensus analyst price target of $45.48 and a 52-week trading range of $27.64 to $46.69.

Baker Hughes was trading down 1% to $45.50, within a 52-week range of $37.58 to $66.07. The consensus price target is $50.72.

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