Baker Hughes Tops Consensus - Analyst Blog
24 Abril 2012 - 10:15AM
Zacks
Baker Hughes Inc.
(BHI) reported first quarter 2012 earnings of 86 cents a share,
which beat the Zacks Consensus Estimate of 83 cents. However, the
quarterly results were below $1.22 earned a year ago.
Revenue shot up more than 18% year
over year to $5,355 million in the quarter from $4,525 million in
the first quarter of 2011. The top line also exceeded the Zacks
Consensus Estimate of $5,259 million.
During the reported quarter, the
company experienced lower margins in North America compared to the
preceding quarter. The factors contributing for the decline were
strains in the Pressure Pumping product line, the challenges faced
in the rapid shift from natural gas to oil-directed drilling rig
activity and the oversupply of Pressure Pumping across the market
as well as the supply chain issues. Excluding Pressure
Pumping, all other groups - Drilling, Evaluation, Completion and
Production showed steady improvements. Internationally, the company
experienced solid top-line growth due to robust performance across
all regions.
Segmental
Highlights
Of Baker Hughes’ total quarterly
revenue, North America, Europe/Africa/Russia/Caspian, Middle
East/Asia-Pacific and Latin America accounted for 53%, 17%, 14% and
11%, respectively. The remainder was generated by the Industrial
Services segment.
A strong improvement in before-tax
profit was noticed in Europe/Africa/Russia/Caspian during the
quarter, which recorded a profit before-tax margin of 17% versus
11% in the year-ago quarter. Pre-tax margin in North America came
in at 14%, compared with 19% in the year-earlier quarter.
Latin America recorded profit
before-tax margin of 12% as against 13% in the year-ago quarter,
while it was 10% in Middle East/Asia-Pacific (down from 12% in the
first quarter 2011). The Industrial Services segment’s margin was
8% compared to the prior-year figure of 9%.
Liquidity
At the end of the first quarter,
Baker Hughes had $780 million in cash and cash equivalents, while
long-term debt was $3,843 million, representing a
debt-to-capitalization ratio of 19.0%. Net cash flow used by the
operating activities in the first quarter was $76 million compared
to net cash flow provided by the operating activities of $76
million in the prior year quarter. The company’s capital
expenditures were $671 million during the reported quarter.
Our Take
Houston, Texas-based Baker Hughes,
the world's third-largest oilfield services provider, is favorably
positioned with significant improvements in activity levels in both
North America and the international regions. The company’s strong
portfolio of products and services will help it generate
better-than-average results in the domestic market and enable it to
further penetrate in the international markets. In this respect,
Europe/Africa/Russia Caspian segment posted outstanding results,
contributed by the robust performance across Africa in numerous
high-profile exploration wells in Nigeria, Angola and Mozambique.
During the reported quarter, Baker Hughes’ also started operations
in Iraq which is likely to augment earnings further in the coming
quarters.
The company also has a competitive
set of technologies, which allows it to pursue deepwater activity
in the GoM. The latest addition to its fleet - Blue Orca –adept at
supporting offshore completion operations and geared to carry on
high-rate and high-volume multi-zone fracturing operations will
boost deepwater exploration upon its completion in late 2013.
The company expects its worldwide
demand to improve further, particularly in China, India, and other
developing nations of Asia and the Middle East, which will in turn
boost its international spending. Activity is also expected to
climb in 2012 led by the steady improvement in Latin America,
Middle East and the deepwater markets and will consequently support
pricing improvements. Baker Hughes remains committed to enhancing
its international operations.
However, Baker Hughes, pointed out
that pricing pressures, supply chain and raw material constraints,
as well as implementation issues will likely weigh on its pressure
pumping business in North America through the second half of this
year.
Baker Hughes holds a Zacks #5 Rank,
which is equivalent to a Strong Sell rating for a period of one to
three months. We maintain a long-term Neutral recommendation on the
stock. The company faces competition from the heavyweight
Schlumberger Ltd. (SLB).
BAKER-HUGHES (BHI): Free Stock Analysis Report
SCHLUMBERGER LT (SLB): Free Stock Analysis Report
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