Baker Hughes Outperforms in 2Q - Analyst Blog
20 Julho 2012 - 8:45AM
Zacks
Baker Hughes Inc.
(BHI) reported second quarter 2012 earnings of $1.00 a share, which
surpassed the Zacks Consusus Estimate and year-ago earnings of 77
cents and 93 cents, respectively.
Revenue increased more than 12% year over year to $5,326 million in
the quarter from $4,741 million in the second quarter of 2011. The
top line also exceeded the Zacks Consensus Estimate of $5,267
million.
During the reported quarter, the company experienced growth in
earnings in spite of tough market conditions in North America. The
improved activity in onshore U.S. as well as initiatives undertaken
to develop the Pressure Pumping business helped the company to
offset the impact of seasonal slowdown in Canada, the increased
costs of certain raw materials and a weak Pressure Pumping market.
Internationally, the company experienced solid top-line growth due
to robust performance primarily in Europe and the Middle East.
Segmental Highlights
Of Baker Hughes’ total quarterly revenue, North America,
Europe/Africa/Russia/Caspian, Middle East/Asia-Pacific and Latin
America accounted for 50%, 17%, 15% 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, which recorded a profit before-tax
margin of 17% versus 5% in the year-ago quarter. Pre-tax margin in
North America came in at 13%, compared with 18% in the year-earlier
quarter.
Latin America recorded profit before-tax margin of 13% (flat with
the year-ago quarter) while it was 11% in Middle East/Asia-Pacific
(down from 12% in the second quarter 2011). The Industrial Services
segment’s margin was 14% compared to the prior-year figure of
15%.
Liquidity
At the end of the second quarter, Baker Hughes had $792 million in
cash and cash equivalents, while long-term debt was $3,841 million,
representing a debt-to-capitalization ratio of 18.6%. Net cash flow
provided by the operating activities as of June 30, 2012 was $124
million compared to $397 million in the prior-year quarter. The
company’s capital expenditures were $771 million.
Our Take
Houston, Texas-based Baker Hughes, the world's third-largest
oilfield services provider, after Schlumberger
Ltd. (SLB) and Halliburton Co. (HAL) 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, the Europe/Africa/Russia Caspian segment posted
outstanding results, contributed by the robust performance across
Europe. The company drilled two longest, extended reach wells in
the remote Yamal Peninsula above the Arctic Circle extending below
the Kara Sea.
During the reported quarter, Baker Hughes’ was awarded a drilling
contract for turn-key delivery of more than 75 wells in the Shaybah
field by Saudi Aramco. This is likely to augment earnings in the
coming quarters.
The company expects its worldwide demand to improve further,
particularly in China, India, and other developing nations of Asia
and the Middle East that will in turn boost its international
spending. Activity is also expected to climb in the balance of 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 enhance 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 #3 Rank, which is equivalent to a
Neutral rating for a period of one to three months. We maintain a
long-term Underperform recommendation on the stock.
BAKER-HUGHES (BHI): Free Stock Analysis Report
HALLIBURTON CO (HAL): Free Stock Analysis Report
SCHLUMBERGER LT (SLB): Free Stock Analysis Report
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