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Why Is Baker Hughes (BKR) Down 6.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Baker Hughes (BKR). Shares have lost about 6.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Baker Hughes due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Baker Hughes Q1 Earnings & Revenue Beat Estimates

Baker Hughes reported first-quarter 2023 adjusted earnings of 28 cents per share, beating the Zacks Consensus Estimate of 26 cents. The bottom line improved from the year-ago quarter’s 15 cents.

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Total quarterly revenues of $5,716 million surpassed the Zacks Consensus Estimate of $5,507 million. The top line also increased from the year-ago quarter’s $4,835 million.

Stronger-than-expected quarterly results have primarily been driven by higher contributions from the Oilfield Services and Equipment, and Industrial & Energy Technology business units.

Segmental Performance

Baker Hughes reorganized its company from four segments to two operating segments. Effective Oct 1, 2022, the two operating segments are Oilfield Services and Equipment, and Industrial & Energy Technology.

Revenues from the Oilfield Services and Equipment unit amounted to $3,577 million, up 19% from the year-ago quarter’s $3,017 million. Baker Hughes’ operating income from the segment was $371 million, up from $213 million reported in first-quarter 2022, backed by increasing revenues in most product lines.

Revenues from the Industrial & Energy Technology unit amounted to $2,138 million, up 18% from the year-ago quarter’s $1,818 million. Baker Hughes’ operating income from the segment was $241 million, flat from the year-ago quarter’s figure due to higher contributions from the Gas Technology segment.

Costs and Expenses

Baker Hughes has recorded total costs and expenses of $5,278 million in the first quarter, up from the year-ago quarter’s $4,556 million.

Orders

Total orders of the company from all business segments in first-quarter 2023 amounted to $7,632 million, up 12% year over year due to higher order intakes from segments like Oilfield Services and Equipment, and Industrial & Energy Technology.

Free Cash Flow

Baker Hughes generated a free cash flow of $197 million in the reported quarter against a negative free cash flow of $105 million in the year-ago period.

Capex & Balance Sheet

Baker Hughes’ net capital expenditure in the first quarter totaled $264 million.

As of Mar 31, 2023, BKR had cash and cash equivalents of $2,415 million. At the first-quarter end, the company had a long-term debt of $5,975 million, marking a debt-to-capitalization of 31%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Baker Hughes has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Baker Hughes has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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