Baker Hughes Earnings Could Be Better Than They Look

Baker Hughes Inc. (BHI) reported second-quarter results before markets opened this morning. The oil field services firm posted adjusted diluted quarterly earnings per share (EPS) of $0.65 on revenues of $5.49 billion. In the same period a year ago, Baker Hughes reported EPS of $1.00 and revenues of $5.33 billion. Second-quarter results also compare to the consensus estimates for EPS of $0.65 on revenues of $5.26 billion.

On a GAAP basis, Baker Hughes posted EPS of $0.54, which includes charges for bad debt in Latin America and inventory on certain of its pressure-pumping materials. Devaluation of Venezuela?s currency also cost the company $0.05 a share.

Baker Hughes did not offer any guidance. The consensus estimates for the third quarter call for EPS of $0.82 on revenues of $5.53 billion. For the full year, EPS is estimated at $3.06 on revenues of $21.71 billion.

The company?s CEO said:

Activity levels continued to rise across the Eastern Hemisphere based on strong demand in deepwater markets, particularly in Europe and Africa, as well as seasonal improvements in Russia. However, our gains in the East were more than offset by a sharp decline in Latin America resulting from reduced activity and demobilization costs in Brazil and Mexico. ? Combined with record performance from our Gulf of Mexico operations, revenue in North America grew 3% sequentially, despite Canadian seasonality reaching its lowest level in four years. Now that Canada is returning to normal activity levels, we foresee a strong rebound in operating margins in the third quarter for North America.

The operating margin for the quarter fell from 10% in 2012 to 9%. The only regional gain came from the company?s Europe/Africa/Russia Caspian group, which grew margin from 11% to 16%, and is the company?s second-largest revenue generator, with about 36% the revenue of the company?s North American operations. North America accounts for just under half of Baker Hughes? revenues.

Compared with results out today from Schlumberger N.V. (SLB), Baker Hughes turned in performance that was just okay. But the company is improving, and at half the size of Schlumberger, it has plenty of space to grow.

Shares are down 2.2% in premarket trading this morning, at $48.00 in a 52-week range of $39.44 to $50.97. Thomson Reuters had a consensus analyst price target of around $52.00 before today?s results were announced.

Source: http://news.yahoo.com/baker-hughes-earnings-could-better-121025434.html

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