Baker Hughes’s 3Q17 revenue by segments
From 3Q16 to 3Q17, Baker Hughes’s, a GE company (BHGE), Oilfield Services segment saw 8.6% higher revenues, while the Turbomachinery & Process Solutions segment’s revenue rose 2%. Its Oilfield Equipment segment suffered the steepest revenue fall of 27.6% among its segments. Baker Hughes accounts for 0.05% of the iShares Dow Jones US ETF (IYY). Since September 29, 2017, IYY has risen 9%—compared to a 6% fall in Baker Hughes’s stock price during the same period. On September 29, 2017, Baker Hughes ended 3Q17.
Baker Hughes’s segment margin analysis
In terms of the adjusted operating income, Baker Hughes’s Oilfield Services segment’s operating loss of $40 million in 3Q16 turned to a $75 million operating profit in 3Q17. In contrast, its operating loss in the Oilfield Equipment segment, where revenues also fell in 3Q17, was $43 million—compared to an operating profit of $61 million a year ago. Baker Hughes’s operating profit fell in the Turbomachinery & Process Solutions and Digital Solutions segments in 3Q17—compared to a year ago. The adjusted operating income excludes merger and related costs.
Negative earnings drivers
- There’s a challenging subsea market with low activity and pressured pricing.
- There’s a deceleration in the US rig count.
- An over-supplied LNG (liquefied natural gas) market has kept natural gas prices low. It had a negative impact on Baker Hughes’s Turbomachinery & Process Solutions segment.
Positive earnings drivers
- A gradual recovery in the measurement and controls-based product portfolio benefits Baker Hughes’s Digital Solutions segment.
- Baker Hughes has a strong well construction business in North America.
- There are long-term service contracts and gas and steam turbine installations.
- There are strong revenues from completions, artificial lift, and the drilling services suite.
- There’s an 18% year-over-year rise in order bookings.
Earnings comparison with peers in 3Q17
Baker Hughes reported a net loss of ~$104 million in 3Q17. In comparison, Tidewater’s (TDW) reported net loss was ~$1.1 billion in 3Q17. In 3Q17, TechnipFMC’s (FTI) net income was $118 million, while Halliburton’s (HAL) net income was $361 million. Read Could Moderation in US Markets Affect Halliburton in 4Q17? to learn more.
Next, we’ll discuss the short interest in Baker Hughes.