Baker Hughes’s segment-wise revenues
From 4Q16 to 4Q17, the Oilfield Services segment of Baker Hughes, a GE company (BHGE), saw a 10% rise in revenue, and BHGE’s Digital Solutions segment saw a 4.3% rise in revenue. On the other hand, the company’s Oilfield Equipment and Turbomachinery & Process Solutions segments witnessed revenue falls of 21% and 14%, respectively.
Baker Hughes’s segment-wise operating income
In terms of adjusted operating income, BHGE’s Oilfield Services segment’s operating loss of $7 million in 4Q16 turned into a $113 million operating profit in 4Q17. In contrast, BHGE’s operating income in the Oilfield Equipment segment fell 78% in 4Q17.
BHGE’s operating profit fell 53% in the Turbomachinery & Process Solutions segment in 4Q17 compared to a year ago. Adjusted operating income excludes mergers and related costs, as we discussed in the previous part of this series.
Value drivers: Positives in 4Q17
- BHGE’s increased volumes in North America, the Middle East, and Latin America
- strong growth in completions, artificial lift, and drilling services
- new unit business and downstream products business benefiting the Turbomachinery & Process Solutions segment
- volume growth and strong cost productivity in the Digital Solutions segment
Negative factors that affected BHGE’s 4Q17 earnings
- 27% fewer oilfield equipment orders driven by lower rig drilling systems orders
- weaker oilfield services volumes in Europe and sub-Saharan Africa
- a challenging subsea market in which activity remained low and pricing remained pressured
- lower orders in the flow and process technologies business
Baker Hughes makes up 0.92% of the iShares U.S. Energy ETF (IYE). BHGE also makes up 0.06% of the SPDR S&P 500 ETF (SPY). The energy sector makes up 6.1% of SPX-INDEX. The S&P 500 Index has risen 23% in the past year compared to the 24% fall in BHGE’s stock price.
Next, we’ll discuss Baker Hughes’s returns.