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Baker Hughes (BKR) Down 4.1% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Baker Hughes (BKR). Shares have lost about 4.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Baker Hughes due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Baker Hughes Q3 Earnings & Revenue Beat Estimates

Baker Hughes reported third-quarter 2023 adjusted earnings of 42 cents per share, which beat the Zacks Consensus Estimate of 39 cents. The bottom line improved from the year-ago quarter’s level of 26 cents.

Total quarterly revenues of $6,641 million surpassed the Zacks Consensus Estimate of $6,515 million. The top line also increased from the year-ago quarter’s level of $5,369 million.

Strong quarterly results were primarily driven by higher contributions from the Oilfield Services and Equipment, and the Industrial & Energy Technology business units.

Segmental Performance

Baker Hughes was reorganized from four to two operating segments — Oilfield Services and Equipment, and Industrial & Energy Technology. The segments became operational from Oct 1, 2022.

Revenues from the Oilfield Services and Equipment unit amounted to $3,951 million, up 16% from the year-ago quarter’s figure of $3,403 million. Our estimate for the company’s revenues from the same unit was pegged at $3,986 million.

Operating income from the segment totaled $465 million, up 43% from $324 million reported in third-quarter 2022, backed by higher volumes.

Revenues from the Industrial & Energy Technology unit amounted to $2,691 million, up 37% from the year-ago quarter’s level of $1,967 million. Our estimate for the company’s revenues from the same unit was pegged at $2,491.3 million.

Operating income from the segment totaled $346 million, up 23% from the year-ago quarter’s level of $282 million, due to higher volumes and pricing.

Costs and Expenses

Baker Hughes recorded total costs and expenses of $5,927 million in the third quarter, up from the year-ago quarter’s figure of $5,100 million. The reported number is also above our projection of $5,912 million.

Orders

Total orders of the company from all business segments amounted to $8,512 million, up 40% year over year. We expected the figure to be $6,985 million.

The outperformance resulted from higher order intakes from the Oilfield Services and Equipment, and the Industrial & Energy Technology segments.

Free Cash Flow

Baker Hughes generated a free cash flow of $592 million in the reported quarter compared with $417 million in the year-ago period.

Capex & Balance Sheet

BKR’s net capital expenditure in the third quarter totaled $219 million.

As of Sep 30, 2023, it had cash and cash equivalents of $3,201 million. The company had a long-term debt of $5,857 million at the end of the reported quarter, marking a debt-to-capitalization of 27.7%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Baker Hughes has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Baker Hughes has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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