Baker Hughes Q3 Earnings: Can NYSE:BKR Hit Its $0.04 EPS Target?

in EARNINGS/INVESTING IDEAS by

Baker Hughes Company (NYSE:BKR) is scheduled to report Q3 earnings results on October 21, 2020.

The company is expected to report earnings of $0.04/share on revenue of $4.768 billion. The consensus earnings per share (EPS) of $0.04/share is based on a poll of 24 analysts and represents a decline in eps of −82.2% over the same quarter last year, when the company reported earnings of $0.21/share.

The revenue forecast of $4.768 billion based on a poll of 21 analysts implies a year-over-year (YoY) decline in revenue of −18.9%. Last year the company reported $5.882 billion in revenue for the quarter.

Expected to report EPS contraction of −82.2% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $4,767.84 $5,882.00 −18.9%
EPS $0.04 $0.21 −82.2%

Earnings Call Trends

Historically, management has exceeded analyst expectations 3 out of the last 7 tracked quarters, missed 3 quarters, and met expectations 1 quarters.

What are your expectations from Baker Hughes Company for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 -$0 -$0.05 1,134.6% Beat
Q1, 2020 -$1.04 $0.11 −110.6% Missed
Q4, 2019 $0.31 $0.27 −13.7% Missed
Q3, 2019 $0.24 $0.21 −13.6% Missed
Q2, 2019 $0.19 $0.20 5.1% Beat
Q1, 2019 $0.14 $0.15 10.9% Beat
Q4, 2018 $0.27 $0.26 −2.4% Missed
Q3, 2018 $0.21 $0.19 −9.2% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 2.3%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 22, 2020 $16.31 $16.69 2.3% Increase
April 22, 2020 $12.75 $13.57 6.4% Increase
January 22, 2020 $22.73 $22.96 1.0% Increase
October 30, 2019 $21.90 $21.40 −2.3% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −4.47, the model suggests that the company is not likely to be an earnings manipulator. A value of −4.47 implies a 0.0% chance of earnings manipulation.

Fundamentals And Technical Analysis

Baker Hughes Company is currently trading at $13.59/share, up 3.4% for the day. The company is trading at approximately 51.7% of its 52-week high of $25.99/share. The company’s stock price is down −18.6% since the last earnings report and up 3.5% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 44.58 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:BKR Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −0.84 and a forward P/E multiple of 61.82.

Baker Hughes Company’s current share price also implies a price-to-book (P/B) multiple of 1.22. The following table summarizes some other key fundamental ratios:

Data as of October 19, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $13.59
P/E Ratio −0.8x
P/E Ratio (Fwd) 61.8x
PEG Ratio 0.0
Total Debt / Total Capital 27.8%
Levered Free Cash Flow $1.177 billion
EV / EBITDA 7.2x

Finbox

Baker Hughes Company is a mid-cap stock with a market capitalization of $8.624 billion and a total enterprise value of $18.503 billion. The company operates in the Energy sector and the Energy Equipment & Services industry.

Baker Hughes Company provides a portfolio of technologies and services worldwide. The company operates through four segments: Oilfield Services (OFS), Oilfield Equipment (OFE), Turbomachinery & Process Solutions (TPS), and Digital Solutions (DS). The OFS segment offers drilling, wireline, evaluation, completion, production, and intervention services; and drilling and completions fluids, completions tools and systems, wellbore intervention tools and services, artificial lift systems, pressure pumping systems, and oilfield and industrial chemicals for oil and natural gas, and oilfield service companies. The OFE segment designs and manufactures products and services, including pressure control equipment and services, subsea production systems and services, drilling equipment, and flexible pipeline systems; and onshore and offshore drilling and production systems, and equipment for floating production platforms, as well as provides services related to onshore and offshore drilling activities. The TPS segment provides equipment and related services for mechanical-drive, compression, and power-generation applications across the oil and gas industry. Its product portfolio includes drivers, compressors, and turnkey solutions; and pumps, valves, and compressed natural gas and small-scale liquefied natural gas solutions. This segment serves upstream, midstream, onshore and offshore, and industrial, as well as engineering, procurement, and construction companies. The DS segment provides sensor-based measurement, non-destructive testing and inspection, turbine, generator and plant controls, and condition monitoring, as well as pipeline integrity solutions for a range of industries, including oil and gas, power generation, aerospace, metals, and transportation. It serves through direct and indirect channels. The company was formerly known as Baker Hughes, a GE company and changed its name to Baker Hughes Company in October 2019. Baker Hughes Company is based in Houston, Texas.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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