Baker Hughes (BHGE) Earnings Miss & Revenues Beat In Q4

Baker Hughes, a GE company (NYSE:BHGE) reported fourth-quarter 2018 adjusted earnings of 26 cents per share, which missed the Zacks Consensus Estimate by a penny. However, the bottom line rose 71% year over year from 15 cents.

Revenues totaled $6,264 million, which surpassed the Zacks Consensus Estimate of $6,041 million and the year-ago quarter’s $5,799 million.

The earnings miss was owing to lower contributions from Bently Nevada and Controls businesses. However, the year-over-year higher results were aided by increase in activities associated to pressure pumping, artificial lift and drilling.

Despite the quarterly earnings miss, the stock rallied almost 5% in pre-market trading as investors cheered the record quarterly order figure.

Segmental Performance

Revenues at the Oilfield Services unit amounted to $3,062 million, up 10% from the year-ago quarter’s sales of $2,781 million.

Operating income in the business segment came in at $224 million, up from $102 million in fourth-quarter 2017.

Higher activities related to pressure pumping, artificial lift and drilling primarily aided the segment.

Revenues at the Oilfield Equipment unit totaled $729 million, up 12% from the prior-year quarter’s $650 million.

Moreover, the segment reported profit of $12 million against a loss of $1 million in the October-to-December quarter of 2017. The upside can be attributed to rise in business volumes related to Surface Pressure Control, Subsea Drilling Systems and Subsea Production Systems.

Revenues at the Turbomachinery & Process Solutions unit improved to $1,782 million from $1,651 million a year ago.

Moreover, segmental income surged to $257 million from $157 million in the fourth quarter of 2017 owing to an increase in productivity.

Revenues at the Digital Solutions segment amounted to $691 million, down 4% from $717 million in the year-ago quarter.

Operating profit in the business segment totaled $115 million, down 3% from the year-ago quarter’s $118 million. Lower contributions from Bently Nevada and Controls businesses hurt the segment.

Orders

Total orders from all business segments through fourth-quarter 2018 were around $6.9 billion, up 21% year over year. Oilfield Services and Turbomachinery & Process Solutions business units accounted for $3.1 billion and $2.1 billion orders, respectively.

Notably, fourth-quarter 2018 order value was the highest in any quarter of the past three years.

Balance Sheet

Baker Hughes’ capital expenditure in the fourth quarter totaled $214 million. As of Dec 31, 2018, the company had approximately $3.7 billion in cash, cash equivalents and restricted cash as well as $6.3 billion in long-term debt, representing a debt-to-capitalization ratio of 17.1%.

Outlook

The company expects transactional businesses in Canada, Latin America and the United States to get affected through the first half of 2019 owing to volatility in crude prices.

Zacks Rank and Key Picks

Currently, Baker Hughes carries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space are TransCanada Corporation (TO:TRP) , RGC Resources Inc. (NASDAQ:RGCO) and Sunoco LP (NYSE:SUN) . While TransCanada carries a Zacks Rank #2 (Buy), RGC Resources and Sunoco sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TransCanada surpassed earnings estimates in each of the trailing four quarters, the average being 19.14%.

RGC Resources delivered average positive earnings surprise of 87.64% in the preceding four quarters.

Sunoco LP pulled off average positive earnings surprise of 18.39% in the trailing four quarters.

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