Baker Hughes (BHI) Incurs Wider-Than-Expected Loss in Q4

Oilfield services player Baker Hughes IncorporatedBHI incurred wider-than-expected loss in fourth-quarter 2016. Postponement of projects and lesser work in the North Sea and Brazil were responsible for the quarterly loss. Cost-reduction initiatives partially limited the downside.

Loss per share from continuing operations (excluding special items) came in at 30 cents, much wider than the Zacks Consensus Estimate of a loss of 12 cents as well as the year-ago loss of 21 cents.

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Revenues of $2,410 million came in above the Zacks Consensus Estimate $2,369 million. This was attributable to higher works in the U.S. onshore operation. The top line, however, plunged from the year-ago level of $3,394 million.

Fourth-Quarter Segment Performance

The company operates through five business segments - North America, Latin America, Europe/Africa/Russia Caspian, Middle East/Asia Pacific and Industrial Services.

Of Baker Hughes' total quarterly revenue, North America, Europe/Africa/Russia/Caspian, Middle East/Asia Pacific and Latin America accounted for 32.2%, 20.3%, 28.5% and 9.3%, respectively. The remainder was generated by the Industrial Services segment.

North America: The company generated revenues of $775 million from this continent, much lower than $1,137 million in the year-ago comparable quarter. The underperformance stemmed from a challenging competitive landscape, but was partially negated by more U.S. onshore operations and seasonal improvements in Canada.

This segment incurred adjusted operating loss before tax of $56 million, narrower than a loss of $127 million in the year-ago period. The narrower loss may be attributed to continuous cost-reduction efforts.

Latin America: The business unit recorded revenues of $225 million as against $428 million in the October to December quarter of 2015.

The segment reported profit before tax of $13 million compared with $15 million in the prior-year quarter.

Lower activities, especially in Brazil, led to the year-over-year fall.

Europe/Africa/Russia Caspian: From this unit, the company generated $490 million in revenues as against $723 million in the fourth-quarter 2015.

The operating loss from this segment was $19 million, which compared unfavorably with profit of $48 million in the last quarter of 2015.

Deferral of projects, along with lesser works in the North Sea, was responsible for the plunge in both the top line and the bottom line.

Middle East/Asia Pacific: Baker Hughes came out with revenues of $687 million as against $820 in the prior-year quarter.

The unit's profit of $91 million was considerably higher than $31 million in the October to December quarter of 2015, mainly due to cost-reduction initiatives.


Depreciation and amortization expenses were $245 million, down 6.5% sequentially and 41.1% year over year. The decrease was owing to reduced capital spending and asset impairments.


At the end of the fourth quarter, Baker Hughes had $4,572 million in cash and cash equivalents, while long-term debt was $2,886 million. In the reported quarter, capital expenditures totaled $106 million, which reflects a decrease of $108 million or 50% from the fourth quarter of 2015. The decline in capital expenditure was primarily owing to lower activity levels and focus on capital discipline.

Share Performance

The company displayed strong price performances over the last three months. During the aforesaid period, Baker Hughes shares improved more than 16% compared with only 9% gain for the Zacks categorized Oil Refining & Marketing industry.


During the first half of 2017, the company projects ramp up of onshore activities in North America. However, the international market might see a decline in activities amid persistent pricing pressure.

Zacks Rank

Baker Hughes currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Apart from Baker Hughes, the other two Big Four oilfield service players that have recently reported fourth-quarter results are Schlumberger LimitedSLB and Halliburton CompanyHAL . Weatherford International plc WFT - the last of the Big Four oilfield service players - is expected report earnings on Feb 1, 2017.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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