We are downgrading our recommendation on Baker Hughes Inc. to
Underperform after the company posting weak third quarter earnings.
The company's third-quarter 2014 results suffered from the
discrepancies in the North American Pressure Pumping business.
Moreover, weak activity in several important markets of Baker
Hughes resulted in an unfavorable mix. Again, it expects its North
American revenue as well as profitability to be below expectations
during the fourth quarter due to a slowdown in drilling activity in
North America and lingering weakness in its pressure pumping
business. Baker also expects its overseas operations to be hurt by
a weak rig count in Brazil and Columbia, as well as delays in the
North Sea and Iraq operations. Given these headwinds, we expect the
shares of Baker Hughes to be under pressure in the near future.
Houston, TX-based Baker Hughes Inc. (BHI) is one of the major
oilfield service companies in the world, providing a range of
services to the global oil and gas industry. The company is a major
supplier of wellbore-related products and technology services and
systems. It caters to drilling, pressure pumping, formation
evaluation, completion and production, and reservoir technology. It
also offers consulting services to the worldwide oil and natural
The company is dynamic in plugging holes in its product line-up
through bolt-on acquisitions. Among the diversified oilfield
service players, Baker Hughes remains one of the best positioned,
with significant improvement in activity levels recorded in both
North America and international regions.
On Apr 28, 2010, Baker Hughes acquired 100% of the outstanding
common stock of BJ Services Company in a cash and stock transaction
valued at $6,897 million. BJ Services is a leading provider of
pressure pumping and other oilfield services and would expand the
portfolio of Baker Hughes'.
The company previously operated through two segments: Completion
and Production as well as Drilling and Evaluation. Following the BJ
Services merger, the company started reporting under five segments
based on its geographical spread. These segments are North America
(Canada, U.S., and Trinidad), Latin America (Central and South
America including Mexico and excluding Trinidad),
Europe/Africa/Russia Caspian or EARC (Europe, Africa excluding
Egypt, and Russia and the republics of the former Soviet Union),
Middle East/Asia-Pacific or MEAP (including Egypt), Industrial and
Others (downstream chemicals, process and pipeline services, and
reservoir and technology consulting businesses). North America,
EARC, MEAP, Latin America, and Industrial and Other segments
accounted for 52 %, 17%, 16%, 11% and 4%, respectively, of the
total revenue in 2012.
Baker Hughes Incorporated (BHI): Read the Full
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