What happened
Baker Hughes (BKR -1.38%) stock crashed this morning and is trading down 9.3% as of 10:20 a.m. ET. The oil services giant may have swung to a profit in its first quarter, but the market expected much more given the recent rally in oil and gas prices. A warning from management isn't helping the stock today either, especially as it comes just one day after rival Halliburton (HAL -0.47%) gave an encouraging outlook.
So what
Here are some key numbers from Baker Hughes' Q1 earnings report, released this morning (all changes year over year):
- Orders: Up 51% to $6.8 billion.
- Revenue: Up 1% to $4.8 billion.
- Earnings per share (EPS): $0.08 per share versus a loss of $0.61 in Q1 2021.
- Adjusted EPS: Up 26% to $0.15 per share.
Looking at those numbers, you can guess why the market isn't happy with Baker Hughes' report: Flat year-over-year revenue was a bummer, and both its revenue and its adjusted earnings figures missed analysts' estimates.
Image source: Getty Images.
Despite oil and gas prices skyrocketing in recent weeks, Baker Hughes' orders in Q1 were up barely 3% sequentially. Although the company received strong orders for its oil-field equipment and turbomachinery and process solutions segments, its oil-field services and digital solutions businesses disappointed. Management blamed geopolitical events and supply chain constraints for lower order off-take in these two segments.
Now what
When oil prices rise, oil and gas exploration and production companies typically pump more money into drilling to sell more oil at higher prices and boost revenues. That's also when companies like Baker Hughes attract more orders for their equipment and services.
Looking ahead, though, CEO Lorenzo Simonelli sees a "favorable oil and gas price backdrop but also a dynamic operating environment" that poses several challenges including inflationary and supply pressures for commodities, key raw material, and labor.
In contrast, Halliburton, which released its first-quarter earnings on April 19, is hugely optimistic about the oil and gas market. It expects oil and gas companies to prioritize short-cycle projects over long-term capital commitments in the current volatile oil price environment, which should help the company outperform.
Not surprisingly, investors in Baker Hughes are miffed at its underwhelming outlook even in a strong oil-price environment and are dumping the stock as they look for better opportunities in oil and gas elsewhere.
