Baker Hughes Stock Teases Buy Point On 2023 Oil Optimism, Despite Q4 Miss Separator Site title Separator Site title

Apr 13, 2024

Oil field services and equipment firm Baker Hughes (BKR) missed its fourth-quarter earnings and revenue targets Monday, but painted a rosy picture for the 2023 oil market, even as the global economy could face headwinds. Baker Hughes stock advanced early before dropping.

Estimates: Analysts predicted EPS growing 60% to 40 cents while revenue was expected to edge up 10% to $6.06 billion.

Earnings: Baker Hughes reported revenue growing 8% to $5.9 billion in Q4. Earnings increased 52% to 38 cents per share.

Orders totaled $8 billion for the quarter, up 32% compared to Q3 and up 20% year over year. For the full year, orders increased 24% to $26.7 billion in 2022. Full-year revenue edged up 3% to $21.16 billion, its first advance in three years. Revenue from the company's oil field services segment increased 10% compared to 2021. Full-year EPS shot up 43% to 90 cents per share.

Outlook: CEO Lorenzo Simonelli said in a statement that the global economy in 2023 was likely to experience challenges "under the weight of inflationary pressures and tightening monetary conditions."

However, Simonelli added that Baker Hughes maintains a "positive outlook for the energy sector, given (oil) supply shortages appear likely to persist."

In its earlier third-quarter report, Baker Hughes topped earnings estimates but missed on revenue views. The company reported EPS growing 62% to 26 cents per share while sales edged up 6% to $5.4 billion.

The Texas-based company supplies oil field services, products, technology and systems to the global oil and natural gas industry. The firm operates through multiple segments and provides products and services for onshore and offshore operations.

BKR shares edged up 1.3% early before falling 1.5% to 30.59 Monday during market trade. On Friday, Baker Hughes stock closed up 1.9% to 31.07.

Baker Hughes stock on Wednesday briefly cleared a 31.98 buy point in a nine-week flat base. Shares pulled back for a quick test of support at the stock's 10-day moving average, closing not quite 3% below the entry on Friday.

BKR shares rank eighth in the Oil&Gas-Machinery/Equipment industry group, which ranks No. 1 out of 197 industries tracked by IBD. SLB, formerly known as Schlumberger, has an 83 Composite Rating out of 99. The stock has an 86 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement. The EPS rating is 90.

Last week, oil field service giant SLB (SLB) topped fourth-quarter revenue and earnings views. The company also gave an optimistic outlook for 2023 and beyond, based on strong oil demand while supply is expected to remain tight.

There have also been optimistic oil demand forecasts from both the International Energy Agency (IEA) and the Organization of Petroleum Exporting Countries (OPEC).

The IEA estimated last week the recent easing of Covid restrictions in China will boost 2023 global oil demand to record highs. That news sent U.S. benchmark oil and U.K. benchmark Brent crude to their highest levels since early December.

OPEC Secretary-General Haithan Al-Ghais also said last week he is "cautiously optimistic" about the outlook for the global economy, as a recovery in oil demand in China is tempered by signs of fragility elsewhere, Bloomberg reported. He also said there could be 500,000 barrels per day growth in China in 2023.

Estimates from the Paris, France-based International Energy Agency forecast China's reopening will drive global oil demand to a record high 101.7 million barrels per day (bpd) in 2023, up by 1.9 million bpd from 2022.

Meanwhile, U.S. crude oil prices on Monday traded around $82 per barrel. U.S. crude oil futures have regained support above their 50-day moving average line, after settling above that line early last week for the first time since mid-November. Between Jan. 3 and Jan. 5, West Texas Intermediate prices dropped 9%, to $73.52 per barrel.

U.S. natural gas futures rose around 2.5% to $3.15 per million British thermal units Monday. Futures dropped to $3.10 per million British thermal units last week, their lowest level since June 2021.

Following SLB and Baker Hughes, Halliburton (HAL) reports fourth-quarter earnings on Jan. 24. Wall Street forecasts earnings ballooning 86% to 67 cents per share. Sales are expected to gain 27%, coming in at $5.58 billion.

SLB stock dropped 2.6% while HAL stock fell 0.3% Monday.

Please follow Kit Norton on Twitter @KitNorton for more coverage.

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