Baker Hughes Incorporated (BHI): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report
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 gas industry.
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.
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