Baker Hughes Second Quarter Earnings Sneak Peek

S&P 500 (NYSE:SPY) component Baker Hughes (NYSE:BHI) will unveil its latest earnings on Friday, July 20, 2012. Baker Hughes provides products and services for the drilling and evaluation of oil and gas wells as well as fluids and chemicals and reservoir technology.

Baker Hughes Earnings Preview Cheat Sheet

Wall St. Earnings Expectations: The average estimate of analysts is for net income of 78 cents per share, a decline of 16.1% from the company’s actual earnings for the same quarter a year ago. During the past three months, the average estimate has moved down from 82 cents. Between one and three months ago, the average estimate moved down. It also has dropped from 80 cents during the last month. Analysts are projecting profit to rise by 15.5% compared to last year’s $3.55.

Past Earnings Performance: The company beat estimates last quarter after falling short in the prior two. In the first quarter, the company reported profit of 86 cents per share versus a mean estimate of net income of 83 cents per share. In the fourth quarter of the last fiscal year, the company missed estimates by 11 cents.

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Wall St. Revenue Expectations: On average, analysts predict $5.26 billion in revenue this quarter, a rise of 11% from the year-ago quarter. Analysts are forecasting total revenue of $21.84 billion for the year, a rise of 10.1% from last year’s revenue of $19.83 billion.

Stock Price Performance: Between April 19, 2012 and July 16, 2012, the stock price fell $1.54 (-3.8%), from $41.02 to $39.48. The stock price saw one of its best stretches over the last year between February 15, 2012 and February 23, 2012, when shares rose for six straight days, increasing 10.5% (+$4.98) over that span. It saw one of its worst periods between July 28, 2011 and August 8, 2011 when shares fell for eight straight days, dropping 26.3% (-$20.59) over that span.

Balance Sheet Analysis: The company’s current ratio of assets to liabilities came in at 2.63 last quarter. Having a ratio above 2:1 is usually considered a good indicator of a company’s liquidity and ability to meet creditor demands. The company regressed in this liquidity measure from 2.8 in the fourth quarter of the last fiscal year to the last quarter driven in part by an increase in liabilities. Current liabilities increased 10.3% to $3.86 billion while assets rose 3.8% to $10.17 billion.

Key Stats:

With double-digit revenue growth the past four quarters, this earnings release is a chance to keep that positive trend going. The company has averaged year-over-year revenue growth of 26.9% over the last four quarters.

An income boost this time around would be welcome news after profit declines in the past two quarters. Net income dropped 6.3% in the fourth quarter of the last fiscal year and then again in the first quarter.

The company’s gross margin shrank by 2.4 percentage points in the in the first quarter. Revenue rose 18.3% while cost of sales rose 22% to $4.26 billion from a year earlier.

Analyst Ratings: There are 11 out of 21 analysts surveyed (52.4%) rating Baker Hughes a buy.

A Look Back: In the first quarter, profit fell 0.5% to $379 million (86 cents a share) from $381 million (87 cents a share) the year earlier, but exceeded analyst expectations.

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(Company fundamentals by Xignite Financials. Earnings estimates provided by Zacks)

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