North American Biz Drives Baker Hughes Earnings - Analyst Blog

Baker Hughes Inc. BHI reported first quarter 2014 adjusted earnings from continuing operations of 84 cents a share, which beat the Zacks Consensus Estimate of 79 cents courtesy of improved North America results. The quarterly figure rose 29.2% from the year-ago adjusted profit level of 65 cents a share.

The year-over-year growth stemmed mainly from resumed Iraq activity, along with improved demand for high technology services in Africa, the Middle East and Asia Pacific.

Total revenue of $5,731 million jumped 9.6% from the year-ago level of $5,230 million and surpassed the Zacks Consensus Estimate of $5,706 million.

First Quarter Segmental Highlights

Of Baker Hughes' total quarterly revenue, North America, Europe/Africa/Russia/Caspian, Middle East/Asia-Pacific and Latin America accounted for 48%, 17%, 19% and 9%, respectively. The remainder was generated by the Industrial Services segment.

An improvement in before-tax profit was noticed in the all the segments. North America recorded a profit before-tax margin of 9.3% (compared with 9% in the year-earlier quarter) and Latin America saw 10.4% (versus 8%). Pre-tax margins at Europe/Africa/Russia/Caspian segment came in at 14.3% (versus 11% in the year-earlier quarter) and the Industrial Services segment margin was 8.4% (versus 8%).

However, Middle East/Asia-Pacific region registered a lackluster pre-tax margin of 12.2% (versus 13%).

Liquidity

At the end of the first quarter, Baker Hughes had $1,200.0 million in cash and cash equivalents, while long-term debt was $3,878.0 million, representing a debt-to-capitalization ratio of 17.7%. The company's capital expenditures were $439.0 million in the quarter.

Ranks

Baker Hughes, the world's third-largest oilfield services provider following Schlumberger Ltd. SLB and Halliburton Co. HAL, holds a Zacks Rank #3 (Hold) and is expected to perform in line with the broader market over the next few months. However, there are other better-ranked sector stocks like Zacks Ranked #1 Unit Corporation UNT.