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Is a Beat in the Offing for Baker Hughes' (BKR) Q4 Earnings?

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Baker Hughes Company (BKR - Free Report) is set to report fourth-quarter 2020 results on Jan 21, before the opening bell.

In the last reported quarter, the company’s earnings of 4 cents per share were in line with the Zacks Consensus Estimate owing to margin expansion in Oilfield Equipment, and higher volumes in Turbomachinery & Process Solutions. Higher cost productivity in Turbomachinery & Process Solutions also benefited the oilfield service provider.

The company beat the Zacks Consensus Estimate for earnings in one of the prior four quarters, met once and missed the same on the other two occasions, delivering a negative earnings surprise of 97.7%, on average. This is depicted in the graph below:

Baker Hughes Company Price and EPS Surprise

Baker Hughes Company Price and EPS Surprise

Baker Hughes Company price-eps-surprise | Baker Hughes Company Quote

Let’s see how things have shaped up prior to the upcoming earnings announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for fourth-quarter earnings per share of 16 cents has seen two upward revisions and no downward movement in the past 60 days. The figure indicates a decrease of 40.7% from the year-ago quarter.

Further, the Zacks Consensus Estimate for revenues of $5.4 billion suggests a 15.8% decline from the prior-year quarter.

What the Quantitative Model Suggests

Our proven model predicts an earnings beat for Baker Hughes this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: Baker Hughes has an Earnings ESP of +10.21%. This is because the Most Accurate Estimate for the quarter’s earnings is 18 cents per share while the Zacks Consensus Estimate is 16 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Baker Hughes currently carries a Zacks Rank #3.

Factors Driving the Better-Than-Expected Earnings

Compared with the September quarter of 2020, prices of both West Texas Intermediate and Brent crude oil improved in the December quarter, thanks to the easing of social-distancing measures. The gradual recovery in oil prices led to a rebound in drilling activities across shale plays, thereby boosting upstream spending. As a supplier of technology, solutions and parts to the exploration and production sector, Baker Hughes’ profits are likely to have increased owing to bullish sentiments. This might have also boosted the company’s Oilfield Services unit.

Cost-saving measures adopted by Baker Hughes was expected to lead to $700 million in annualized cost savings in 2020. A significant portion of it is expected to have been realized in the fourth quarter, thereby enhancing profit levels.

Other Stocks That Warrant a Look

Here are some other firms that you may want to consider as these too have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

RPC, Inc. (RES - Free Report) has an Earnings ESP of +25.53% and is a Zacks #3 Ranked player. The company is scheduled to release fourth-quarter results on Jan 27. You can see the complete list of today’s Zacks #1 Rank stocks here

EOG Resources, Inc. (EOG - Free Report) has an Earnings ESP of +7.02% and a Zacks Rank of 3. It is scheduled to report fourth-quarter results on Feb 25.

Viper Energy Partners LP (VNOM - Free Report) has an Earnings ESP of +118.18% and a Zacks Rank #3. The firm is scheduled to release fourth-quarter earnings on Feb 22.

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