Baker Hughes’s segment-wise revenues
Baker Hughes, a GE Company (BHGE), released its 1Q18 financial results on April 20. On a combined business basis, from 1Q17 to 1Q18, Baker Hughes’s Oilfield Services segment saw 12% higher revenues, followed by the Digital Solutions (4.4% revenue up). Baker Hughes’s Oilfield Equipment and Turbomachinery & Process Solutions segments witnessed a revenue decline (7.3% and 11.2% revenue fall) YoY (year-over-year) in 1Q18.
Baker Hughes’s segment-wise operating income
In regards to the adjusted operating income, Baker Hughes’s Oilfield Services segment’s operating income increased 85% YoY in 1Q18. In contrast, the operating income in the Oilfield Equipment segment turned to a $6-million loss in 1Q18 from an operating income of $50 million last year. The operating profit declined 53% in the Turbomachinery & Process Solutions segment in 1Q18—compared to last year.
Positive value drivers in 1Q18
- There was an increased share of higher-margin product and synergy realization following Baker Hughes’s merger with GE’s oil and gas business. In 1Q18, Baker Hughes realized $144 million of synergies. The company could have $700 million of synergy realization in 2018.
- There were 10% higher orders in the Turbomachinery & Process Solutions and Oilfield Services segments.
- The Digital Solutions segment had volume growth and strong cost productivity.
Negative factors that impacted 1Q18 earnings
- Lower activity in Latin America, Asia, and the Middle East had a negative impact on the Oilfield Services segment.
- Decreased activity in the drilling systems business, flexible pipe business, and offshore business had a negative impact on Baker Hughes’s Oilfield Equipment segment’s orderbook.
- There was a lower contractual services volume in the Turbomachinery & Process Solutions segment.
Baker Hughes accounts for 0.90% of the iShares U.S. Energy ETF (IYE). IYE provides exposure to US companies that produce and distribute oil and gas. IYE decreased 1% in the past year—compared to a 15% fall in Baker Hughes’s stock price during the same period.
Next, we’ll discuss Baker Hughes’s returns.