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We expect Baker Hughes Inc. (BHI - Analyst Report), one of the largest oilfield service companies in the world, to beat expectations when the company reports its second-quarter 2013 results before the opening bell on Jul 19, 2013.  

Why a Likely Positive Surprise?

Our proven model shows that Baker Hughes is likely to beat earnings because it has the right combination of two key factors.  

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate of 66 cents and the Zacks Consensus Estimate of 64 cents, stands at +3.13%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares. 

Zacks Rank #3 (Hold): The stocks with a Zacks Rank #1 (Strong buy), #2 (Buy) and #3 (Hold) have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered while going into an earnings announcement.

The combination of Baker Hughes’ Zacks Rank #3 (Hold) and +3.13% ESP makes us very confident of a positive earnings beat on Jul 19, 2013.  

What is Driving the Better-Than-Expected Earnings?

Baker Hughes' strong portfolio of products and services should help it post better-than-average results in North America and enable it to further expand in the international markets.

Moreover, Baker Hughes has a competitive set of technologies, which allows it to bolster its activity in the deepwater Gulf of Mexico (GoM). The company has successfully introduced products such as the AutoTrak Rotary Steerable System and advanced completion systems in the region that have a meaningful impact on its earnings and cash flows.

Finally, both oil and natural gas-directed drilling increased from the tough levels of mid 2009 with majority of the recent drilling being oil-directed. The increase in oil drilling was supported by high commodity prices and the development of several new oil shale plays. Incremental gas drilling was driven by higher activity in the gas shale plays. Being one of the largest oilfield service companies, Baker Hughes is capitalizing on these favorable trends.

Other Stocks to Consider

Here are some other energy firms that are worth considering as these have the right combination to post an earnings beat this quarter:

W&T Offshore Inc. (WTI - Snapshot Report) has an Earnings ESP of +9.09% and a Zacks Rank #1 (Strong Buy).

PetroQuest Energy Inc. (PQ - Snapshot Report) has an Earnings ESP of +28.57% and a Zacks Rank #1 (Strong Buy).

Core Laboratories NV(CLB - Analyst Report) has an Earnings ESP of +0.76% and a Zacks Rank #2 (Buy).

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