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Baker Hughes Earnings Outperform

Zacks Equity Research

Baker Hughes Inc. (BHI) reported first quarter 2013 adjusted earnings from continuing operations of 65 cents a share, which beat the Zacks Consensus Estimate of 62 cents aided by improved North America results. However, the quarterly figure fell 24.4% from the year-ago adjusted profit level of 86 cents a share.

The year-over-year decline stemmed mainly from seasonal weakness, in particular the Europe/Africa/Russia/Caspian segment. Moreover, weak activity in several important markets of Baker Hughes resulted in an unfavorable mix.

Total revenue of $5,230 million fell 2.3% from the year-ago level of $5,355 million. However, the top line surpassed the Zacks Consensus Estimate of $5,172 million.

First Quarter Segmental Highlights

Of Baker Hughes' total quarterly revenue, North America, Europe/Africa/Russia/Caspian, Middle East/Asia-Pacific and Latin America accounted for 50%, 16%, 17% and 11%, respectively. The remainder was generated by the Industrial Services segment.

An improvement in before-tax profit was noticed in the Middle East/Asia-Pacific region, which recorded a profit before-tax margin of 13% versus 10% in the year-ago quarter. The Industrial Services segment margin remained unchanged at 8%.

All other segments registered lackluster pre-tax margins, with North America coming in at 9% (compared with 14% in the year-earlier quarter) and Latin America coming in at 8% (versus 12%). Pre-tax margins at Europe/Africa/Russia/Caspian segment came in at 11% (versus 17% in the year-earlier quarter).


At the end of the first quarter, Baker Hughes had $1,101.0 million in cash and cash equivalents, while long-term debt was $3,844.0 million, representing a debt-to-capitalization ratio of 18.1%. The company's capital expenditures were $490.0 million in the quarter.


Baker Hughes, the world's third-largest oilfield services provider following Schlumberger Ltd. (SLB) and Halliburton Co. (HAL), holds a Zacks Rank #3 (Hold) and is expected to perform in line with the broader market over the next few months. However, there are other better performing sector stocks, like Zacks Ranked #1 Range Resources Corporation (RRC), that are likely to outperform the market.

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