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Is a Beat in the Offing for Baker Hughes' (BKR) Q2 Earnings?

Baker Hughes Company BKR is set to report second-quarter 2020 results on Jul 22, before the opening bell.

In the last reported quarter, its earnings per share of 11 cents beat the Zacks Consensus Estimate of 9 cents due to strong performance of the Oilfield Services segment, and higher cost productivity in Turbomachinery & Process Solutions.

The oilfield service player beat the Zacks Consensus Estimate for earnings in two of the prior four quarters and missed on the other two occasions, delivering an earnings surprise of 0.5%, on average. This is depicted in the graph below:

Baker Hughes Company Price and EPS Surprise

Baker Hughes Company Price and EPS Surprise

Baker Hughes Company price-eps-surprise | Baker Hughes Company Quote

Let’s see how things have shaped up prior to the earnings announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for second-quarter loss per share has narrowed from 2 cents to 1 cent in the past 30 days. The figure indicates a decrease of 105% from the year-ago quarter.

Further, the Zacks Consensus Estimate for revenues of $4.7 billion suggests a 21.1% decrease from the prior-year quarter.

What the Quantitative Model Suggests

Our proven model predicts an earnings beat for Baker Hughes this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: Baker Hughes has an Earnings ESP of +25.00%. This is because the Most Accurate Estimate for the quarter is currently pegged higher than the Zacks Consensus Estimate of a loss of 1 cent per share. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Baker Hughes currently carries a Zacks Rank #3.

Factors Driving the Better-Than-Expected Earnings

Baker Hughes’ earnings depend heavily on exploration and production (‘E&P’) companies’ spending. In the second quarter, the gradual recovery in oil prices led to a rebound in drilling activities across shale plays, thereby boosting E&P spending. As a supplier of technology, solutions and parts to the E&P sector, Baker Hughes’ profits are likely to have increased owing to the bullish sentiment. This might have also boosted the company’s Oilfield Services unit.

While some international E&Ps pulled back spending due to weak oil prices, the degree of decline is likely to have been less than North America. This is because most of these projects are backed by national oil companies and/or integrated majors with long-term horizons. This might have positively impacted Baker Hughes’ profits.

Other Stocks That Warrant a Look

Here are some other firms that you may also want to consider as these too have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Enbridge Inc. ENB has an Earnings ESP of +3.24% and is a Zacks #2 Ranked player. The company is scheduled to release second-quarter results on Jul 29. You can see the complete list of today’s Zacks #1 Rank stocks here.

Range Resources Corporation RRC has an Earnings ESP of +5.69% and a Zacks Rank of 2. It is scheduled to report second-quarter results on Aug 3.

Cimarex Energy Co. XEC has an Earnings ESP of +13.53% and holds a Zacks Rank #2. It is set to report second-quarter results on Aug 5.

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