Leading oilfield services company, Baker Hughes Inc. BHI is set to report first-quarter 2015 results on Apr 21, before the opening bell.
In the last reported quarter, the company’s earnings of $1.44 per share came above the Zacks Consensus Estimate of $1.08. The results were boosted by the company’s strong operational performance. However, the steep fall in the oil price acted as a dampener.
Will Baker Hughes impress with its upcoming release after combating some serious challenges it witnessed in the three-month period ended Mar 31? Let’s see what factors might have influenced the earnings report this time around.
Past Quarter Flashback
During the first quarter, the Houston-based oilfield services company reported a persistent fall in the U.S. rig count (number of rigs searching for oil and gas). This can be primarily attributed to an unrelenting fall in crude prices. WTI and Brent witnessed similar declines resulting from an oversupplied market. The strength of the dollar against other currencies also made oil dearer to importers, thus contributing to the slump.
Overall crude price has tumbled almost 50% since last June owing to abundant supply of the commodity in the face of lackluster global demand. On top of that, oil price is expected to remain low in 2015. Owing to weak commodity pricing, most of the drillers have decided to halve their 2015 capital spending over 2014. Hence, Baker Hughes, which supports drilling players in setting up oil wells, is in turn also expected to earn less in the first quarter.
Baker Hughes’ activities during the quarter proved inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate declined to 57 cents from 72 cents per share 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 first 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 -41.07%. This is because the Most Accurate estimate and the Zacks Consensus Estimate stand at 33 cents and 56 cents, respectively.
Zacks Rank: Baker Hughes’ has a Zacks Rank #3 which increases the predictive power. But the company’s -41.07% leaves our surprise prediction inconclusive.
We caution against Sell-rated stocks with 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.
Marathon Petroleum Corporation MPC has Earnings ESP of +1.76% and a Zacks Rank #1.
Spectra Energy Corp. SE has Earnings ESP of +6.98% and a Zacks Rank #2.
Western Refining, Inc. WNR has Earnings ESP of +4.67% and a Zacks Rank #2.
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