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Overseas Strength to Aid Baker Hughes' (BKR) Q4 Earnings

Zacks Equity Research

Baker Hughes Company BKR is set to report fourth-quarter 2019 results on Jan 22, before the opening bell.

Despite the oilfield service player beating the Zacks Consensus Estimate for earnings in two of the prior four quarters, the company has a negative earnings surprise of 0.95%, on average. This is depicted in the graph below:

Baker Hughes Company Price and EPS Surprise

 

Baker Hughes Company Price and EPS Surprise

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

 

In the last reported quarter, Baker Hughes’ earnings per share of 21 cents missed the Zacks Consensus Estimate of 24 cents, thanks to lower contributions from activities related to flow and process technology. However, investors expect the company to beat estimates this time around. Let’s see how things have shaped up prior to the announcement.

Trend in Estimate Revision

Let’s take a look at the estimate revision trend to get a clear picture of what analysts feel about the company prior to the upcoming earnings release.

The Zacks Consensus Estimate for fourth-quarter earnings of 31 cents has seen no upward revision but two downward movements in the past 30 days. The figure suggests a year-over-year improvement of 19.2%.

Further, the Zacks Consensus Estimate for revenues is pegged at $6.5 billion for the quarter, indicating an improvement of almost 4% from the year-ago reported figure.

Why a Likely Positive Surprise?

Our proven model predicts an earnings beat for Baker Hughes this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. 

Earnings ESP: The company’s Earnings ESP is +1.64%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Baker Hughes currently carries a Zacks Rank #3.

What’s Driving the Better-Than-Expected Earnings?

In the December quarter of 2019, the oil and gas drillers added a higher number of rigs in international resources as compared to the prior-year period. Per data provided by Baker Hughes, the total count of international onshore and offshore drilling rigs in the month of October, November and December of 2019, was 1130, 1096 and 1104, respectively. In the year-ago months, the tallies were recorded at 1017, 991 and 1025, respectively.

Since oilfield service firms assist explorers and drillers in setting up oil and gas wells, the ramp-up in international drilling operations has likely contributed to the company’s fourth-quarter earnings.

Other Stocks That Warrant a Look

Here are a few other firms that you may also want to consider on the basis of our model. These have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Magellan Midstream Partners MMP has an Earnings ESP of +1.98% and is Zacks #3 Ranked. The partnership is slated to release earnings on Jan 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Antero Resources AR has an Earnings ESP of +36.47% and a Zacks Rank #3. The company is set to release earnings on Feb 12.

BP plc BP has an Earnings ESP of +5.84% and is Zacks #3 Ranked. The company is scheduled to release earnings on Feb 4.

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Magellan Midstream Partners, L.P. (MMP) : Free Stock Analysis Report
 
Baker Hughes Company (BKR) : Free Stock Analysis Report
 
BP p.l.c. (BP) : Free Stock Analysis Report
 
Antero Resources Corporation (AR) : Free Stock Analysis Report
 
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