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Baker Hughes (BHI) Incurs Narrower-Than-Expected Loss in Q1

Zacks Equity Research

Oilfield services player Baker Hughes Incorporated BHI incurred narrower-than-expected loss in first-quarter 2017. The company’s North America onshore business improved, mainly in its well construction product lines.

Loss per share from continuing operations (excluding special items) came in at 4 cents, much narrower than the Zacks Consensus Estimate of a loss of 21 cents as well as the year-ago loss of 44 cents. 

Revenues of $2,262 million came in below the Zacks Consensus Estimate of $2,278 million. The top line also deteriorated from the year-ago level of $2,670 million.

First-Quarter Segment Performance

The company operates through five business segments – North America, Latin America, Europe/Africa/Russia Caspian, Middle East/Asia Pacific and Industrial Services.

Of Baker Hughes' total quarterly revenue, North America, Europe/Africa/Russia/Caspian, Middle East/Asia-Pacific and Latin America accounted for 31.5%, 20.4%, 29.2% and 8.9%, respectively. The remainder was generated by the Industrial Services segment.

North America: The company generated revenues of $712 million from this continent compared with $819 million in the year-ago quarter. The underperformance stemmed from deconsolidation of the North America onshore pressure pumping business and a steep decline in activity in the Gulf of Mexico. However, the downside was partially negated by an increase in the U.S. onshore business and higher seasonal activity in Canada.

This segment incurred adjusted operating loss before tax of $23 million, narrower than a loss of $225 million in the year-ago period. This may be attributed to the absence of a benefit related to the deconsolidation of the North America onshore pressure pumping business and inventory write-off in the prior quarter.

Latin America: The business unit recorded revenues of $201 million as against $277 million in the January–March quarter of 2016. The decrease in revenues may be attributed to decline in activity across the region and absence of year-end product sales.

The segment reported profit before tax of $84 million, which compared favorably with adjusted operating loss before tax of $66 million in the prior-year quarter.

Europe/Africa/Russia Caspian: The company generated $461 million in revenues as against $611 million in first-quarter 2016. Seasonal activity declines, mainly in the Russia-Caspian area, and lower activity in West Africa (particularly Nigeria) as a result of labor union strikes, were responsible for the plunge in top line.

Operating profit from this segment was $1 million, which compared favorably with a loss of $19 million in the last quarter of 2016.

Middle East/Asia Pacific: Baker Hughes recorded revenues of $661 million as against $718 in the prior-year quarter.

The unit’s profit of $72 million was considerably higher than $49 million in the January–March quarter of 2016.

Expenses

Depreciation and amortization expenses were $218 million, down 11% sequentially and 38.4% year over year.
 

Baker Hughes Incorporated Price, Consensus and EPS Surprise

 

Baker Hughes Incorporated Price, Consensus and EPS Surprise | Baker Hughes Incorporated Quote

Liquidity

At the end of the first quarter, Baker Hughes had $4,222 million in cash and cash equivalents, while long-term debt was $2,884 million. In the reported quarter, capital expenditures increased $1 million from first-quarter to $87 million.

Zacks Rank

Baker Hughes currently has a Zacks Rank #4 (Sell). Some better-ranked stocks from the same space are Diamond Offshore Drilling Inc. DO, Cenovus Energy Inc. CVE and Bellatrix Exploration Ltd. BXE. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Diamond Offshore Drilling posted a positive earnings surprise of 341.67% in the preceding quarter. It topped estimates in all of the four trailing quarters with an average positive earnings surprise of 353.28%.

Cenovus Energy posted a positive earnings surprise of 583.33% in the preceding quarter. It surpassed estimates in two of the four trailing quarters with an average positive earnings surprise of 74.89%.

Bellatrix Exploration posted a positive earnings surprise of 240.00% in the preceding quarter. The company beat estimates in three of the four trailing quarters with an average positive earnings surprise of 58.54%.

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