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Baker Hughes (BHGE) Down 7.9% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Baker Hughes (BHGE - Free Report) . Shares have lost about 7.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Baker Hughes due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Baker Hughes Beats Q1 Earnings, Revenues Match Estimates

Baker Hughes, a GE company reported first-quarter 2019 adjusted earnings of 15 cents per share, which beat the Zacks Consensus Estimate by a penny. Moreover, the bottom line rose from the year-ago quarter’s 9 cents.

Revenues totaled $5,615 million, in line with the Zacks Consensus Estimate. The figure is higher than the year-ago quarter’s $5,399 million.

The strong quarterly results were backed by higher order volume in the Subsea Production Systems business. Increased activities in the Middle East and Sub-Saharan Africa also aided the results.

Segmental Performance

Revenues from the Oilfield Services unit amounted to $2,986 million, up 12% from the year-ago quarter’s sales of $2,678 million. Operating income from the business segment came in at $176 million, up from $141 million in first-quarter 2018. The upside was driven by increased activities in the Middle East and Sub-Saharan Africa.

Revenues from the Oilfield Equipment unit totaled $735 million, up 11% from the prior-year quarter’s $664 million. Notably, the segment reported profit of $12 million against a loss of $6 million in the year-ago quarter. The upside can be attributed to a rise in order volume in the Subsea Production Systems business.

Revenues from the Turbomachinery & Process Solutions unit declined to $1,302 million from $1,460 million a year ago. Moreover, segmental income fell to $118 million from $119 million in the first quarter of 2018 owing to lower equipment installations and upgrades.

Revenues from the Digital Solutions segment amounted to $592 million, down 1% from $598 million in the year-ago quarter. Operating profit in the business segment totaled $68 million, down 6% from the year-ago quarter’s $73 million. The segment was affected by lower volumes in Controls and Software businesses, partially offset by higher volumes in Measurement & Sensing and Pipeline & Process Solutions businesses.

Orders

Total orders from all its business segments through first-quarter 2019 were around $5.7 billion, up 9% year over year. Oilfield Equipment, Oilfield Services and Digital Solutions business units were responsible for the upside.

Capex & Balance Sheet

Baker Hughes’ capital expenditure in the first quarter totaled $235 million.

As of Mar 31, 2019, the company had cash and cash equivalents of approximately $3,073 million, as well as a long-term debt of $6,270 million, representing a debt-to-capitalization ratio of 15.2%.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a flat path over the past two months.

VGM Scores

At this time, Baker Hughes has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Baker Hughes has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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