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Analyzing Baker Hughes’s Revenues and Earnings in Q1 2018

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Jul. 9 2018, Updated 7:43 a.m. ET

Baker Hughes’s segment-wise revenues

On a combined business basis, from Q1 2017 to Q1 2018, Baker Hughes’s (BHGE) Oilfield Services segment saw 12% higher revenues, followed by digital solutions with 4.4% revenue growth. On the other hand, its Oilfield Equipment and Turbomachinery & Process Solutions segments witnessed revenue declines of 7.3% and 11.2%, respectively, year-over-year in the first quarter. The Oilfield Services segment was the highest revenue contributor of ~50% of BHGE’s Q1 2018 revenues, followed by the Turbomachinery & Process Solutions segment with growth of 27%. 

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Revenue comparison with peers

On a combined business basis, BHGE’s revenues increased 1.4% in the first quarter compared to a year ago. In comparison, Oceaneering International’s (OII) revenues decreased 7%, while Weatherford International’s (WFT) first quarter revenues increased 3% compared to a year ago. During the same period, Nabors Industries’ (NBR) revenues increased 31%. NBR’s acquisition of Tesco in December 2017 was the primary factor in the significant revenue rise. Read more on this in Market Realist’s Can Nabors Bank on Synergies from Tesco?

Baker Hughes’s segment-wise operating income

BHGE’s Oilfield Services segment’s adjusted operating income increased 85% year-over-year in the first quarter. In contrast, operating income in the Oilfield Equipment segment turned to a $6 million loss in Q1 2018 from $50 million in operating income a year ago. Operating profit fell 53% in the Turbomachinery & Process Solutions segment in Q1 2018 compared to a year ago. In Q1 2018, the Digital Solutions segment’s operating margin was the highest at 12.2%, followed by the Turbomachinery & Process Solutions segment at 8.2%.

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Value drivers: Positives

  • the increased share of higher-margin product and synergy realization from the merger
  • volume growth and strong cost productivity in the Digital Solutions segment
  • 10% higher orders in the Turbomachinery & Process Solutions and Oilfield Services segments YoY

Negative factors that affected BHGE’s earnings

  • decreased activity in the drilling systems business and the flexible pipe business and offshore business, which negatively affected BHGE’s Oilfield Equipment segment’s order booking
  • lower contractual services volume in the Turbomachinery & Process Solutions segment
  • the negative impact of lower activity in Latin America, Asia, and the Middle East on the Oilfield Services segment

Next, we will discuss Baker Hughes’s EBITDA margin and upstream companies’ capex.

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