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Baker Hughes (BKR) Q3 Earnings Miss Estimates, Orders Rise

Zacks Equity Research

Baker Hughes Company BKR reported third-quarter 2019 adjusted earnings of 21 cents per share, which missed the Zacks Consensus Estimate of 24 cents primarily due to lower contributions from activities related to flow and process technology.

However, the bottom line improved from the year-ago quarter’s 19 cents, courtesy of strong growth in oilfield service businesses in the Middle East, Asia Pacific and Europe.

Revenues totaled $5,882 million, missing the Zacks Consensus Estimate of $6,113 million. The figure, however, was higher than the year-ago quarter’s $5,665 million.

Segmental Performance

Revenues from the Oilfield Services unit amounted to $3,348 million, up 12% from the year-ago sales of $2,993 million. Operating income from the business segment came in at $274 million, up from $231 million in third-quarter 2018. The upside was driven by strong growth in the Middle East, Asia Pacific and Europe.

Revenues from the Oilfield Equipment unit totaled $728 million, up 15% from the prior-year quarter’s $631 million. Notably, the segment reported a profit of $14 million, suggesting a significant improvement from the year-ago quarter’s $6 million. This can be attributed to increased contributions from Subsea Production Systems and Subsea Services businesses.

Revenues from the Turbomachinery & Process Solutions unit declined to $1,197 million from $1,389 million a year ago, owing to lower contributions from activities related to flow and process technology. However, segmental income increased to $161 million from $132 million in the third quarter of 2018, thanks to higher cost productivity.

Revenues from the Digital Solutions segment amounted to $609 million, down 7% from $653 million in the year-ago quarter. Operating profit at the business segment totaled $82 million, down 23% from the year-ago quarter’s $106 million. The segment was affected by a decline in volumes in Pipeline & Process Solutions, Software and Controls businesses.


Total orders from all business segments in third-quarter 2019 were $7,783 million, up 35% year over year owing to growth in three of the company’s four segments.

Free Cash Flow

It generated free cash flow of $161 million in the reported quarter, improving from $146 million in the year-ago period.

Capex & Balance Sheet

Baker Hughes’ capital expenditure in the third quarter totaled $199 million.

As of Sep 30, 2019, the company had cash and cash equivalents of approximately $2,808 million as well as a long-term debt of $6,313 million, representing a debt-to-capitalization ratio of 16.9%.

Zacks Rank & Stocks to Consider

Baker Hughes currently carries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space are Crescent Point Energy Corp. CPG, Pembina Pipeline Corporation PBA and Matrix Service Company MTRX. While Crescent Point and Pembina Pipeline sport a Zacks Rank #1 (Strong Buy), Matrix Service carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.     

Crescent beat the Zacks Consensus Estimate in three of the prior four quarters, the average positive earnings surprise being 235.1%.

Pembina Pipeline has an average positive earnings surprise of 28.1% for the past four quarters.

Matrix Service has managed to beat the Zacks Consensus Estimate for earnings in three of the past four quarters.

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