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Houston-based oilfield services company, Baker Hughes Incorporated (BHI - Analyst Report) is set to report its first-quarter 2013 results on Apr 19, 2013. Let’s see how things are shaping up prior to the announcement.

In the last quarter, the company’s earnings of 62 cents per share decreased 48.3% from $1.20 per share earned in the year-ago quarter. The results were adversely impacted by unfavorable pricing conditions in the North American Pressure Pumping business. However, the results managed to beat the Zacks Consensus Estimate by a penny.

Growth Factors this Past Quarter

Baker Hughes’ fourth-quarter results were stable having surpassed the Zacks Consensus Estimate for both revenues and earnings. However unfavorable pricing conditions in the North American Pressure Pumping business had resulted in year-over-year lower numbers both at the top and the bottom line.

The improvement came from strong international performance, thanks to Latin America and Europe/Africa/CIS. The company’s robust seasonal year-end sales, which represented more than 50% of international revenue growth, were also of help. Although Middle East/Asia Pacific experienced some issues with Iraq start-up costs, these are expected to subside in late 2013 and return to more standardized margins.

Of late in Baker Hughes’ monthly rig count release, the average U.S. rig count for Mar 2013 was 1,756, down 223 from 1,979 counted a year earlier. The monthly average Canadian rig count was 464, down 28 from 492 counted in Mar 2012. This shows that North American doldrums will continue to affect oil service providers going forward.

Management believes the Middle East/Asia Pacific, and Europe/Africa/Russia/Caspian regions, in particular Iraq and Saudi Arabia, are likely to be the primary growth drivers in the future. In such a scenario, we believe oil field providers like Schlumberger Ltd. (SLB - Analyst Report) without an overt North American exposure would fare well going forward.

Earnings Whispers?

Our proven model does not conclusively show that Baker Hughes’ is likely to beat first quarter earnings. That is because a stock needs to have both a positive Zacks Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The Expected Surprise Prediction or ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate Estimate and Zacks Consensus Estimate currently stands at 62 cents.
 
Zacks Rank #3 (Hold): Baker Hughes’ Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with an ESP of 0.00% indicates the possibility of in line results. We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Exterran Partners, L.P. (EXLP - Snapshot Report) has an earnings ESP of +4.35% and a Zacks Rank #1 (Strong Buy).

Epl Oil & gas Inc. has an earnings ESP of +9.76% and a Zacks Rank #1 (Strong Buy).
 

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