Friday, February 13, 2015

Baker Hughes, After Best-In-Class Margin Expansion, Is In A Strong Position To Weather The Slump

This article was first published by Seeking Alpha on January 29, 2015.
By Sarfaraz A. Khan. Research Asst: Adnan Mushtaq

Oilfield services giant Baker Hughes (NYSE:BHI) has recently released its fourth quarter that came in better than market's expectations. In terms of margin expansion, the company outperformed its peers Halliburton (NYSE:HAL) and Schlumberger (NYSE:SLB).

Baker Hughes's revenues climbed 13.2% year-over-year to $6.64 billion on the back of 20.4% growth in North America and 13.1% growth in the Middle East and Asia Pacific. The company's profits climbed from $248 million last year to $663 million, which translated into adjusted earnings of $1.44 a share. Analysts, on the other hand, were expecting revenues of $6.41 billion from earnings of $1.07 a share, as per data compiled by Thomson Reuters.

During the quarter, Baker Hughes benefited from better utilization in the pressure pumping where margins improved to record levels in three years and resumption of the high-margin activity at the Gulf of Mexico. The company also achieved its goal of mid-teens operating margin in North America with operating margins of 14.8%. The company reported year-over-year margin growth of 650 bps in North America, which compares against Halliburton and Schlumberger's margin expansion of 193 bps and 1 bps. Overall, Halliburton's total EBIT margin growth in the fourth quarter was better than Halliburton and Schlumberger on year-over-year and sequential basis.

Baker Hughes also introduced a range of innovative products and services, such as the SHADOW Frac Plug, which played an important role in driving its top and bottom-line growth. During the previous fiscal year, Baker Hughes launched 160 new …. Read full article at Seeking Alpha