Why Baker Hughes Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of oil-field services specialist Baker Hughes (NYSE: BHI  ) climbed 10% on Friday after its quarterly results topped Wall Street expectations.

So what: The stock has been crushed over the past year on persistently low natural gas prices and several efficiency issues, but today's first-quarter beat -- EPS of $1.00 versus the consensus of just $0.77 -- eases some of those concerns. While the company continues to struggle with rapidly rising costs, increased drilling activity in its overseas markets offers some signs of a potential turnaround.

Now what: Management expects its U.S. natural gas rig count to fall to 488 at the end of 2012, down from 809 in the year-ago period, but sees its oil rig count increasing by 300 to 1,430. "We are cautiously optimistic about the market outlook for the remainder of the year," said President and CEO Martin Craighead. "If commodity prices remain at current levels, we believe activity in onshore U.S. should remain stable. In the Gulf of Mexico and International, we expect continuing improvement as these markets expand." With the stock still down about 40% over the past year and trading at a forward P/E of 11, I wouldn't let today's rally prevent me from buying into that optimism.   

Interested in more info on Baker Hughes? Add it to your watchlist.