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What's in Store for Baker Hughes (BHGE) in Q2 Earnings?

Zacks Equity Research

Baker Hughes, a GE company BHGE is set to release second-quarter 2019 results before the market opens on Jul 31.

Although the oilfield service player beat the Zacks Consensus Estimate in the March quarter of 2019, the company missed estimates in three of the past four quarters, the average negative earnings surprise being 7.3%.

Let’s see how things are shaping up for this announcement.

Which Way are Estimates Trending?

Let’s take a look at estimate revisions to get a clear picture of what analysts are thinking about the company before the earnings release.

Although, the Zacks Consensus Estimate for second-quarter earnings of 19 cents has witnessed no upward and downward revisions by firms in the past 30 days, the bottom-line is likely to see year-over-year earnings growth of 90%.

The Zacks Consensus Estimate for second-quarter revenues is pegged at $5.8 billion, suggesting an improvement of roughly 5% from the year-ago reported figure.

Factors at Play

The Zacks Consensus Estimate for second-quarter operating income from the Digital Solutions unit is pegged at $82 million, reflecting a decline from $96 million in the year-ago reported quarter.

The Oilfield Equipment segment is expected to generate an operating income of $11.59 million compared with the year-ago period’s reported loss of $12.

The Zacks Consensus Estimate for second-quarter operating income from the Oilfield Services segment is pegged at $228 million, implying a rise from the year-ago reported figure of $189 million.

The Zacks Consensus Estimate for operating income from the Turbomachinery & Process Solutions is pegged at $125 million, indicating an increase from $113 million in the June quarter of 2018.

Total orders from all the segments for the second quarter is expected to be $7.5 billion, suggesting an increase from the year-ago figure of roughly $6 billion. 

Increase in total orders and rising profit levels from Oilfield Equipment and Oilfield Services units will likely boost the company’s second-quarter earnings. However, lower profit levels in Digital Solutions can affect earnings growth in the to-be-reported quarter.

Baker Hughes, a GE company Price and EPS Surprise

 

Baker Hughes, a GE company Price and EPS Surprise

Baker Hughes, a GE company price-eps-surprise | Baker Hughes, a GE company Quote

What Our Model Unveils

Our proven model does not conclusively show that Baker Hughes is likely to beat the Zacks Consensus Estimate in the quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Earnings ESP: Earnings ESP represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Baker Hughes has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 19 cents. 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. Though a Zacks Rank of 3 increases the predictive power of ESP, an Earnings ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Energy Stocks With Favorable Combination

Here are some companies from the energy space which, according to our model, have the right combination of elements to post an earnings beat in the upcoming quarterly reports.

Williams Companies WMB has an Earnings ESP of +3.60% and a Zacks Rank of 3. The firm is expected to release earnings on Jul 31. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Encana Corporation ECA has an Earnings ESP of +5.56% and is Zacks #3 Ranked. The company is anticipated to release earnings on Jul 31.

Independence Contract Drilling, Inc. ICD has an Earnings ESP of +18.18% and a Zacks Rank #3. The company is anticipated to release earnings on Aug 1.

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Encana Corporation (ECA) : Free Stock Analysis Report
 
Independence Contract Drilling, Inc. (ICD) : Free Stock Analysis Report
 
Williams Companies, Inc. (The) (WMB) : Free Stock Analysis Report
 
Baker Hughes, a GE company (BHGE) : Free Stock Analysis Report
 
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