A month has gone by since the last earnings report for Baker Hughes Incorporated . Shares have lost about 5.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Fourth-Quarter 2016 Results
Baker Hughes incurred wider-than-expected loss in fourth-quarter 2016. Postponement of projects and lesser work in the North Sea and Brazil were responsible for the quarterly loss. Cost-reduction initiatives partially limited the downside.
Loss per share from continuing operations (excluding special items) came in at $0.30, much wider than the Zacks Consensus Estimate of a loss of $0.12 as well as the year-ago loss of $0.21.
Revenues of $2,410 million came in above the Zacks Consensus Estimate $2,369 million. This was attributable to higher works in the U.S. onshore operation. The top line, however, plunged from the year-ago level of $3,394 million.
Fourth-Quarter Segment Performance
The company operates through five business segments – North America, Latin America, Europe/Africa/Russia Caspian, Middle East/Asia Pacific and Industrial Services.
Of Baker Hughes' total quarterly revenue, North America, Europe/Africa/Russia/Caspian, Middle East/Asia Pacific and Latin America accounted for 32.2%, 20.3%, 28.5% and 9.3%, respectively. The remainder was generated by the Industrial Services segment.
North America: The company generated revenues of $775 million from this continent, much lower than $1,137 million in the year-ago comparable quarter. The underperformance stemmed from a challenging competitive landscape, but was partially negated by more U.S. onshore operations and seasonal improvements in Canada.
This segment incurred adjusted operating loss before tax of $56 million, narrower than a loss of $127 million in the year-ago period. The narrower loss may be attributed to continuous cost-reduction efforts.
Latin America: The business unit recorded revenues of $225 million as against $428 million in the October to December quarter of 2015.
The segment reported profit before tax of $13 million compared with $15 million in the prior-year quarter.
Lower activities, especially in Brazil, led to the year-over-year fall.
Europe/Africa/Russia Caspian: From this unit, the company generated $490 million in revenues as against $723 million in the fourth-quarter 2015.
The operating loss from this segment was $19 million, which compared unfavorably with profit of $48 million in the last quarter of 2015.
Deferral of projects, along with lesser works in the North Sea, was responsible for the plunge in both the top line and the bottom line.
Middle East/Asia Pacific: Baker Hughes came out with revenues of $687 million as against $820 in the prior-year quarter.
The unit’s profit of $91 million was considerably higher than $31 million in the October to December quarter of 2015, mainly due to cost-reduction initiatives.
Expense
Depreciation and amortization expenses were $245 million, down 6.5% sequentially and 41.1% year over year. The decrease was owing to reduced capital spending and asset impairments.
Liquidity
At the end of the fourth quarter, Baker Hughes had $4,572 million in cash and cash equivalents, while long-term debt was $2,886 million. In the reported quarter, capital expenditures totaled $106 million, which reflects a decrease of $108 million or 50% from the fourth quarter of 2015. The decline in capital expenditure was primarily owing to lower activity levels and focus on capital discipline.
Guidance
During the first half of 2017, the company projects ramp up of onshore activities in North America. However, the international market might see a decline in activities amid persistent pricing pressure.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter. In the past month, the consensus estimate has shifted 231.77% downward due to these changes.
VGM Scores
At this time, Baker Hughes' stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is Baker Hughes (BHI) Down 5.2% Since the Last Earnings Report?
A month has gone by since the last earnings report for Baker Hughes Incorporated . Shares have lost about 5.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Fourth-Quarter 2016 Results
Baker Hughes incurred wider-than-expected loss in fourth-quarter 2016. Postponement of projects and lesser work in the North Sea and Brazil were responsible for the quarterly loss. Cost-reduction initiatives partially limited the downside.
Loss per share from continuing operations (excluding special items) came in at $0.30, much wider than the Zacks Consensus Estimate of a loss of $0.12 as well as the year-ago loss of $0.21.
Revenues of $2,410 million came in above the Zacks Consensus Estimate $2,369 million. This was attributable to higher works in the U.S. onshore operation. The top line, however, plunged from the year-ago level of $3,394 million.
Fourth-Quarter Segment Performance
The company operates through five business segments – North America, Latin America, Europe/Africa/Russia Caspian, Middle East/Asia Pacific and Industrial Services.
Of Baker Hughes' total quarterly revenue, North America, Europe/Africa/Russia/Caspian, Middle East/Asia Pacific and Latin America accounted for 32.2%, 20.3%, 28.5% and 9.3%, respectively. The remainder was generated by the Industrial Services segment.
North America: The company generated revenues of $775 million from this continent, much lower than $1,137 million in the year-ago comparable quarter. The underperformance stemmed from a challenging competitive landscape, but was partially negated by more U.S. onshore operations and seasonal improvements in Canada.
This segment incurred adjusted operating loss before tax of $56 million, narrower than a loss of $127 million in the year-ago period. The narrower loss may be attributed to continuous cost-reduction efforts.
Latin America: The business unit recorded revenues of $225 million as against $428 million in the October to December quarter of 2015.
The segment reported profit before tax of $13 million compared with $15 million in the prior-year quarter.
Lower activities, especially in Brazil, led to the year-over-year fall.
Europe/Africa/Russia Caspian: From this unit, the company generated $490 million in revenues as against $723 million in the fourth-quarter 2015.
The operating loss from this segment was $19 million, which compared unfavorably with profit of $48 million in the last quarter of 2015.
Deferral of projects, along with lesser works in the North Sea, was responsible for the plunge in both the top line and the bottom line.
Middle East/Asia Pacific: Baker Hughes came out with revenues of $687 million as against $820 in the prior-year quarter.
The unit’s profit of $91 million was considerably higher than $31 million in the October to December quarter of 2015, mainly due to cost-reduction initiatives.
Expense
Depreciation and amortization expenses were $245 million, down 6.5% sequentially and 41.1% year over year. The decrease was owing to reduced capital spending and asset impairments.
Liquidity
At the end of the fourth quarter, Baker Hughes had $4,572 million in cash and cash equivalents, while long-term debt was $2,886 million. In the reported quarter, capital expenditures totaled $106 million, which reflects a decrease of $108 million or 50% from the fourth quarter of 2015. The decline in capital expenditure was primarily owing to lower activity levels and focus on capital discipline.
Guidance
During the first half of 2017, the company projects ramp up of onshore activities in North America. However, the international market might see a decline in activities amid persistent pricing pressure.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter. In the past month, the consensus estimate has shifted 231.77% downward due to these changes.
Baker Hughes Incorporated Price and Consensus
Baker Hughes Incorporated Price and Consensus | Baker Hughes Incorporated Quote
VGM Scores
At this time, Baker Hughes' stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.