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What's in Store for Baker Hughes (BHI) in Q4 Earnings?

Oilfield services firm Baker Hughes IncorporatedBHI is set to report fourth-quarter 2016 results on Jan 26, before the opening bell.

Last quarter, the company posted a positive earnings surprise of 65.12%. However, it had an average negative earnings surprise of 32.05% in the last four quarters. Let's see how things are shaping up for this announcement.

Factors at Play

Although oil prices remained low in the first two months of the fourth quarter, the commodity advanced after OPEC decided to cut production. On Nov 30, the cartel reached a historic accord to curb output in keeping with the need to recover from the weak pricing scenario. Notably, this is the first time since 2008 that OPEC signed a deal to cut oil production.

Thereafter, non-OPEC players also jumped on the bandwagon to limit crude output. After the historic deal, crude started moving north and even crossed the psychological $50 per barrel mark. In fact, throughout December the commodity was sold above the benchmark.

Overall, the last month of fourth quarter was favorable for oil exploration and production (E&P) companies. These firms continued to gather on the oil patches as evidenced by the improved rig count data issued by Baker Hughes. Definitely, increase in E&P activities will result in more contracts for oilfield services players like Baker Hughes to efficiently set up oil wells.

In fact, the stock has showed strong pricing strength in the last three months. During the aforesaid period, Baker Hughes shares gained almost 19% compared with 9.3% improvement for the Zacks categorized Oil & Gas-Field Services industry.

However, the Zacks Consensus Estimate for fourth quarter has widened from a loss of 10 cents to a loss of 11 cents over the last 30 days.

Earnings Whispers

Our proven model does not conclusively show that Baker Hughes is likely to beat the Zacks Consensus Estimate in the fourth quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for Baker Hughes is -45.46%. This is because the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 16 cents and a loss of 11 cents, respectively. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Baker Hughes has a Zacks Rank #3, which increases the predictive power. However, the company's ESP of -45.46% makes surprise prediction inconclusive.

Conversely, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Noble Midstream Partners LP NBLX , which is likely report quarterly earnings on Feb 1, has a Zacks Rank #1 and an Earnings ESP of +19.18%. You can see the complete list of today's Zacks #1 Rank stocks here .

Core Laboratories N.V. CLB with an Earnings ESP of +4.88% has a Zacks Rank #2. The company is anticipated to report quarterly results on Jan 25.

SM Energy Company SM has an Earnings ESP of +11.91% and a Zacks Rank #3. The company is expected to release earnings results on Feb 28.

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Baker Hughes Inc. (BHI): Free Stock Analysis Report

Core Laboratories NV (CLB): Free Stock Analysis Report

SM Energy Co. (SM): Free Stock Analysis Report

Noble Midstream Partners LP (NBLX): Free Stock Analysis Report

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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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