Baker Hughes (BHI) Q3 Earnings: Is A Beat In The Cards?
Zacks Investment Research | Oct 19, 2016 09:04PM ET
Baker Hughes Incorporated (NYSE:BHI) is set to report third-quarter 2016 results on Oct 25, before the opening bell. Last quarter, the company posted a negative earnings surprise of 50.00%. Moreover, the company posted an average negative earnings surprise of 31.67% in the last four quarters. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Baker Hughes is likely to beat earnings because it has the right combination of the two key ingredients.
Zacks ESP: Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at +9.09%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: Baker Hughes currently carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank of #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings.
Conversely, sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.
The combination of Baker Hughes’ Zacks Rank #2 and positive ESP makes us reasonably confident of an earnings beat.
What is Driving the Better-than-Expected Earnings?
Baker Hughes' strong portfolio of products and services should help it post better-than-average results. As the world's third-largest oilfield services provider, the company boasts a competitive set of technologies. This allows it to increase its activity in the deepwater Gulf of Mexico (GoM).
Moreover, oil prices have recovered significantly from the mid-February lows. This has enabled exploration and production companies to engage in more upstream operations as evidenced by the substantial increase in the U.S. rig count in recent times.
The company’s data, which is being issued since 1944, is as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry. According to Baker Hughes’ rig count for Sep 2016, the total number of rigs in the U.S. increased from the Aug 2016 count owing to a rise in the number of land rigs. This represents the fourth consecutive increase in the U.S. monthly rig count. The increase in drilling operations will translate into more work for oilfield services firms like Baker Hughes as it helps exploration and production companies in efficiently setting up the oil and gas wells. This in turn should allow the company to report better-than-expected financial numbers.
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