Baker Hughes Earnings: Margins Suffer as Costs Rise, Profit Falls

S&P 500 (NYSE:SPY) component Baker Hughes Inc. (NYSE:BHI) reported its results for the third quarter. Baker Hughes provides products and services for the drilling and evaluation of oil and gas wells as well as fluids and chemicals and reservoir technology.

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Baker Hughes Inc. Earnings Cheat Sheet

Results: Net income for the oil-field services fell to $279 million (60 cents per share) vs. $706 million ($1.61 per share) a year earlier. This is a decline of 60.5% from the year-earlier quarter.

Revenue: Rose 3.2% to $5.23 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Baker Hughes Inc. reported adjusted net income of 73 cents per share. By that measure, the company fell short of mean estimate of 89 cents per share. Analysts were expecting revenue of $5.26 billion.

Quoting Management: “For the third quarter, Baker Hughes’ revenue was flat, despite a drop in U.S. and international rig counts,” said Martin Craighead, Baker Hughes’ President and Chief Executive Officer. “However, our margins were impacted by the well-known imbalance in the North American Pressure Pumping business. Additionally, activity was less than planned in several key geomarkets for Baker Hughes, resulting in an unfavorable mix. The clearest example is Canada, where the seasonal return of activity was nearly 30 percent less than this time last year. Internationally, the collective rig count in Brazil, Colombia, and Norway was down 17 percent compared to the last quarter, and these are all meaningful markets for Baker Hughes. In the fourth quarter, activity levels in our International segments are projected to rebound.”

Key Stats:

The company fell short of forecasts after beating estimates in the previous two quarters. In the second quarter, it topped the mark by 22 cents, and in the first quarter, it was ahead by 3 cents.

Net income has increased 27.9% year-over-year on average across the last five quarters. The biggest gain came in the third quarter of the last fiscal year, when income climbed more than twofold from the year-earlier quarter.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the fourth quarter has moved down from $1.12 a share to $1 over the last ninety days. The average estimate for the fiscal year is $3.53 per share, down from $3.78 ninety days ago.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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