Shares of energy services company Baker Hughes, a GE Company (NYSE:BHGE) fell 13% in April, according to data provided by S&P Global Market Intelligence. The stock drifted lower throughout the month, which isn't surprising given the information in its April 5 rig count release. The company reported that the U.S. onshore rig count in March fell sequentially from February. Since that market is one of the most important in the world today (and contains by far the largest fraction of Baker Hughes' rigs), it's not surprising that investors were less than thrilled with the news.
However, the stock also dropped sharply following the company's earnings release at the end of April. That swift move pushed the monthly share price decline from the mid-single-digit percentages to a total of 13%.
On the surface, Baker Hughes' results seemed pretty strong. First-quarter sales were up 4% year over year, with adjusted operating income up 20%. Orders, meanwhile, were up 9%. Compared to Q1 2018, it was a clear improvement.
However, trends in the energy industry can shift quickly, and investors were justifiably less pleased with how the Q1 results compared to those from Q4 2018. Sequentially, Baker Hughes' revenues fell 10%, adjusted operating income dropped 45%, and orders declined 17%.
Those numbers, viewed in combination with the March rig count, painted a much less positive picture for Baker Hughes. Management tried to put as much of an upbeat spin on its outlook as it could, but clearly, investors were displeased with the sequentially weak results.
There's a lot going on at Baker Hughes today. Dealing with the ups and downs of the often-volatile energy industry is business as usual for the company. However, layered on top of that is fact that General Electric, its largest shareholder, is reducing its stake in the energy services company. Add the share-price headwind of those stock sales to the headwind of current industry conditions, and it looks like most investors should probably avoid Baker Hughes for now. When GE is finally out of the picture, however, it might make sense to reexamine the investment thesis for this company.