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Baker Hughes (BKR) Misses Earnings & Revenue Estimates in Q2

Baker Hughes Company BKR has reported second-quarter 2022 adjusted earnings of 11 cents per share, missing the Zacks Consensus Estimate of 22 cents. However, the bottom line improved from the year-ago quarter’s earnings of 10 cents per share.

Total quarterly revenues of $5,047 million missed the Zacks Consensus Estimate of $5,372 million. The top line also declined from the year-ago quarter’s $5,142 million.

Lower-than-expected earnings were primarily caused by a decline in cost productivity and inflation pressures in Digital Solutions. This was offset by higher contributions from the Oilfield Services business unit.

Baker Hughes Company Price, Consensus and EPS Surprise

 

Baker Hughes Company Price, Consensus and EPS Surprise
Baker Hughes Company Price, Consensus and EPS Surprise

Baker Hughes Company price-consensus-eps-surprise-chart | Baker Hughes Company Quote

Segmental Performance

Revenues from the Oilfield Services unit amounted to $2,689 million, up 14% from the year-ago quarter’s $2,358 million. Baker Hughes’ operating income from the segment was $261 million, up from $171 million reported in second-quarter 2021, backed by higher volumes and prices.

Revenues of Baker Hughes from the Oilfield Equipment unit totaled $541 million, down 15% from the prior-year quarter’s $637 million. The segment was affected by a decline in volumes in Baker Hughes’ Subsea Productions Systems and Surface Pressure Control Projects. Increased volumes in Flexibles and Services partially offset the negatives. The segment reported a loss of $12 million, turning around from a profit of $28 million in second-quarter 2021.

Revenues of Baker Hughes from the Turbomachinery & Process Solutions unit declined to $1,293 million from $1,628 million a year ago due to a dip in equipment and project revenues. The segmental income of Baker Hughes decreased to $218 million from $220 million in the second quarter of 2021, owing to lower service revenues.

Revenues of Baker Hughes from the Digital Solutions segment amounted to $524 million, up from $520 million in the year-ago quarter. Waygate Technologies, and the Process and Pipeline Services businesses witnessed higher volumes that supported revenue growth. The operating profit of Baker Hughes in the segment totaled $18 million, down 28% from the year-ago quarter’s $25 million. The segment was affected by a decline in cost productivity and inflation pressures.

Costs and Expenses

Baker Hughes recorded total costs and expenses of $5,072 million in the second quarter, up from the year-ago quarter’s $4,948 million.

Orders

Total orders of the company from all business segments in second-quarter 2022 amounted to $5,860 million, up 15% year over year due to higher order intakes from segments like Turbomachinery & Process Solutions, Oilfield Equipment, Oilfield Services and Digital Solutions.

Free Cash Flow

Baker Hughes generated a free cash flow of $147 million in the reported quarter compared with $385 million in the year-ago period.

Capex & Balance Sheet

Baker Hughes’ net capital expenditure in the second quarter totaled $174 million.

As of Jun 30, 2022, Baker Hughes had cash and cash equivalents of $2,928 million. At the second-quarter end, the company had long-term debt of $6,625 million, implying a debt-to-capitalization of 30.6%.

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Baker Hughes expects commodity prices to remain at elevated levels due to years of underinvestment globally and the potential need to replace Russia exports. Hence, the company expects the outlook for oil prices to remain volatile but supportive of strong activity levels. The company expects a healthy recovery for the third quarter on the back of accelerating activity and pricing.

Baker Hughes continues to invest in the energy transition and industrial initiatives, and expects to return 60-80% of free cash flow to shareholders.

Zacks Rank & Stock to Consider

Baker Hughes currently carries a Zacks Rank #3 (Hold).

Investors interested in the energy sector might look at the following companies that presently flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Eni SPA E, based in Rome, Italy, is among the leading integrated energy players in the world. Eni expects its 2022 cash flow from operations, before changes in working capital at replacement cost, to grow to €16 billion.

Eni has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 30 days. The company currently has a Zacks Style Score of A for Value, Growth and Momentum. Eni is expected to see earnings growth of 134.4% in 2022.

Valero Energy Corporation VLO is the largest independent refiner and marketer of petroleum products in the United States.  Among all independent refiners, Valero offers the most diversified refinery base, with a capacity of 3.2 million barrels per day.

Valero has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 30 days. The company currently has a Zacks Style Score of A for Growth and Momentum, and B for Value. VLO is expected to see earnings growth of 630.6% in 2022.

Phillips 66 PSX is the leading player in each of its operations like refining, chemicals and midstream in terms of size, efficiency and strengths. PSX hiked its quarterly dividend to 97 cents per share, representing an increase of 5% from the prior quarter.

Phillips 66 has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 30 days. The company currently has a Zacks Style Score of A for Growth and Momentum, and B for Value. PSX is expected to see earnings growth of 154.2% in 2022.


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