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Baker Hughes (BKR) Q2 Earnings Miss on Weak Oilfield Services
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Baker Hughes Company (BKR - Free Report) reported second-quarter 2020 adjusted loss of 5 cents per share, wider than the Zacks Consensus Estimate of a loss of a penny. The year-ago adjusted profit was 20 cents per share.
Revenues totaled $4,736 million, beating the Zacks Consensus Estimate of $4,687 million. However, the figure was lower than the year-ago quarter’s $5,994 million.
The unimpressive earnings were attributed to weak performance of Oilfield Services, Oilfield Equipment and Digital Solutions segments. A sharp decline in activities due to lower hydrocarbon prices amid the coronavirus pandemic affected the company’s results. This was partially offset by higher cost productivity in Turbomachinery & Process Solutions.
Baker Hughes Company Price, Consensus and EPS Surprise
Revenues from the Oilfield Services unit amounted to $2,411 million, down 26% from the year-ago figure of $3,263 million. The downside was due to lower revenues from North America, Latin America, Sub-Saharan Africa and the Middle East. Operating income from the segment was $46 million, down from $233 million reported in second-quarter 2019 due to reduced volume and unfavorable business mix. The negatives were partially offset by decreased fixed costs. It set a new record of remotely drilling 2 miles in 24 hours.
Revenues from the Oilfield Equipment unit totaled $696 million, marginally up from the prior-year quarter’s $693 million. Notably, the segment reported a loss of $14 million against the year-ago profit of $14 million. This year-over-year deterioration was caused by impacts from lower productivity and unfavorable mix.
Revenues from the Turbomachinery & Process Solutions unit declined to $1,161 million from $1,405 million a year ago owing to lower equipment and services volumes. However, segmental income increased to $149 million from $135 million in the second quarter of 2019 owing to higher cost productivity.
Revenues from the Digital Solutions segment amounted to $468 million, down 26% from $632 million in the year-ago quarter. Operating profit at the segment totaled $41 million, down 51% from the year-ago quarter’s $84 million. The segment was affected by lower volumes, partially offset by a favorable business mix.
Orders
Total orders from all business segments in second-quarter 2020 were $4,888 million, down 25% year over year due to lower orders in Digital Solutions, Oilfield Services, and Turbomachinery & Process Solutions. This was partially offset by higher Oilfield Equipment orders from the prior-year quarter.
Free Cash Flow
The company generated positive free cash flow of $63 million in the reported quarter compared with $355 million in the year-ago period.
Capex & Balance Sheet
Baker Hughes’ capital expenditure in the second quarter totaled $167 million, lower than $238 million in the year-ago period.
As of Jun 30, 2020, the company had cash and cash equivalents of approximately $4,132 million, and a long-term debt of $6,766 million, representing a debt-to-capitalization ratio of 27.8%.
Outlook
Baker Hughes expects uncertainty in the oil and gas industry to prevail going forward. Economic recovery from the coronavirus pandemic and supply response to the ongoing market situation will likely aid the crude price environment in the future. The company expects to cut costs and optimize portfolio to navigate through the current market uncertainty. It expects to achieve $700 million in annualized cost savings by 2020-end.
NGL Energy Partners’ bottom line for second-quarter 2020 is expected to rise 92.7% year over year.
Antero Resources’ bottom line for second-quarter 2020 is expected to rise 28.6% year over year.
Centennial Resource’s second-quarter earnings estimates have improved over the past 30 days, with two upward estimate revisions and no downward movement.
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Baker Hughes (BKR) Q2 Earnings Miss on Weak Oilfield Services
Baker Hughes Company (BKR - Free Report) reported second-quarter 2020 adjusted loss of 5 cents per share, wider than the Zacks Consensus Estimate of a loss of a penny. The year-ago adjusted profit was 20 cents per share.
Revenues totaled $4,736 million, beating the Zacks Consensus Estimate of $4,687 million. However, the figure was lower than the year-ago quarter’s $5,994 million.
The unimpressive earnings were attributed to weak performance of Oilfield Services, Oilfield Equipment and Digital Solutions segments. A sharp decline in activities due to lower hydrocarbon prices amid the coronavirus pandemic affected the company’s results. This was partially offset by higher cost productivity in Turbomachinery & Process Solutions.
Baker Hughes Company Price, Consensus and EPS Surprise
Baker Hughes Company price-consensus-eps-surprise-chart | Baker Hughes Company Quote
Segmental Performance
Revenues from the Oilfield Services unit amounted to $2,411 million, down 26% from the year-ago figure of $3,263 million. The downside was due to lower revenues from North America, Latin America, Sub-Saharan Africa and the Middle East. Operating income from the segment was $46 million, down from $233 million reported in second-quarter 2019 due to reduced volume and unfavorable business mix. The negatives were partially offset by decreased fixed costs. It set a new record of remotely drilling 2 miles in 24 hours.
Revenues from the Oilfield Equipment unit totaled $696 million, marginally up from the prior-year quarter’s $693 million. Notably, the segment reported a loss of $14 million against the year-ago profit of $14 million. This year-over-year deterioration was caused by impacts from lower productivity and unfavorable mix.
Revenues from the Turbomachinery & Process Solutions unit declined to $1,161 million from $1,405 million a year ago owing to lower equipment and services volumes. However, segmental income increased to $149 million from $135 million in the second quarter of 2019 owing to higher cost productivity.
Revenues from the Digital Solutions segment amounted to $468 million, down 26% from $632 million in the year-ago quarter. Operating profit at the segment totaled $41 million, down 51% from the year-ago quarter’s $84 million. The segment was affected by lower volumes, partially offset by a favorable business mix.
Orders
Total orders from all business segments in second-quarter 2020 were $4,888 million, down 25% year over year due to lower orders in Digital Solutions, Oilfield Services, and Turbomachinery & Process Solutions. This was partially offset by higher Oilfield Equipment orders from the prior-year quarter.
Free Cash Flow
The company generated positive free cash flow of $63 million in the reported quarter compared with $355 million in the year-ago period.
Capex & Balance Sheet
Baker Hughes’ capital expenditure in the second quarter totaled $167 million, lower than $238 million in the year-ago period.
As of Jun 30, 2020, the company had cash and cash equivalents of approximately $4,132 million, and a long-term debt of $6,766 million, representing a debt-to-capitalization ratio of 27.8%.
Outlook
Baker Hughes expects uncertainty in the oil and gas industry to prevail going forward. Economic recovery from the coronavirus pandemic and supply response to the ongoing market situation will likely aid the crude price environment in the future. The company expects to cut costs and optimize portfolio to navigate through the current market uncertainty. It expects to achieve $700 million in annualized cost savings by 2020-end.
Zacks Rank & Stocks to Consider
The company currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include NGL Energy Partners LP (NGL - Free Report) , Antero Resources Corporation (AR - Free Report) and Centennial Resource Development, Inc. , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NGL Energy Partners’ bottom line for second-quarter 2020 is expected to rise 92.7% year over year.
Antero Resources’ bottom line for second-quarter 2020 is expected to rise 28.6% year over year.
Centennial Resource’s second-quarter earnings estimates have improved over the past 30 days, with two upward estimate revisions and no downward movement.
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Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
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