Baker Hughes Inc.
) reported fourth quarter 2012 adjusted earnings from continuing
operations of 62 cents a share, which beat the Zacks Consensus
Estimate by a penny on strong international results. However, the
quarterly figure fell 48.3% from the year-ago adjusted profit
level of $1.20 a share.
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The year over year underperformance stemmed mainly from
unfavorable pricing conditions in the North American Pressure
Pumping business. Moreover, weak activity in several important
markets of Baker Hughes resulted in an unfavorable mix.
Total revenue of $5,221 million in the quarter declined almost 2%
from the year-ago level of $5,295 million. However, the top line
surpassed the Zacks Consensus Estimate of $5,193 million.
Full-year 2012 adjusted earnings from continuing operations came
in at $3.00 a share, missing our expectation of $3.20 by 6.3% and
the year-ago earnings of $4.14 by 27.5%.
Total revenue of $20,929 million in 2012 increased 7.7% year over
year but was below the Zacks Consensus Estimate of $21,036
Fourth Quarter Segmental Highlights
Of Baker Hughes' total quarterly revenue, North America,
Europe/Africa/Russia/Caspian, Middle East/Asia-Pacific and Latin
America accounted for 49%, 18%, 17% and 12%, respectively. The
remainder was generated by the Industrial Services segment.
An improvement in before-tax profit was noticed in
Europe/Africa/Russia/Caspian, which recorded a profit before-tax
margin of 18% versus 11% in the year-ago quarter, and in
Industrial Services segment with 11% margin (versus 3% in the
year-ago quarter). All other segments registered lackluster
pre-tax margins, with North America coming in at 9% (compared
with 15% in the year-earlier quarter) and Latin America at 1%
(versus 3%). Pre-tax margins at Middle East/Asia-Pacific segment
came in at 9% (at par with the year-earlier quarter).
At the end of the fourth quarter, Baker Hughes had $1,015.0
million in cash and cash equivalents, while long-term debt was
$3,837.0 million, representing a debt-to-capitalization ratio of
18.2%. The company's capital expenditures were $714.0 million in
Baker Hughes, the world's third-largest oilfield services
), holds a Zacks Rank #5 (Strong Sell).
Although Baker Hughes reregistered impressive international
growth and has strong positions in various offshore markets
worldwide, its earnings dropped on an annualized basis during
The company's significant improvement in its Integrated
Operations business in the Middle East and the Gulf of Mexico
performance (which generated 30% growth in 2012) remain
overshadowed by the ongoing pricing pressures, supply chain and
raw material constraints as well as implementation issues on its
pressure pumping business in North America. Its margins were hit
particularly by a fall in the North American pressure pumping
Given these headwinds, we expect the shares of Baker Hughes to be
under pressure in the near future. However, one oilfield service
company, which is expected to perform well in the coming one to
three months, is
Hornbeck Offshore Services, Inc
). It carries a Zacks Rank #2 (Buy).