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Baker Hughes (NYSE:BHI) is set to release its 1st quarter 2013 earnings this Friday, April 19th at 8:00 am EST. Below I have provided an update of the quarter as well as an overview of earnings expectations.

Profile and Estimates

Baker Hughes has a market cap of $19.88 billion and currently trades for $44.08 per share. Shares are up 10.54% YTD and trade 20.1% above their 52 week low of $36.70. Analysts have a mean target price of $49.84 and a median price target of $50.00 on the shares. Thirty one analysts have an average first quarter earnings per share estimate of $0.63 on estimated revenues of $5.18 billion. Baker Hughes has beat earnings estimates in three of the last four quarters.

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Fundamentals and Highlights

Positives

  • Recent purchase of pressure-pump provider BJ Services will allow Baker Hughes to become a more one-stop provider for customers, much like Schlumberger (NYSE:SLB) has already implemented.
  • Positive results from more focused research and development as evidenced by new technologies GeoForm and FracPoint.
  • Exposure to high growth regions in Russia and the Middle East.
  • Dividend yield of 1.33%.
  • P/E of 15.2, P/B of 1.2 and P/S of 0.9 are all below the industry averages 18.5, 2.0 and 1.5 respectively.
  • Three year average revenue growth of 30.3%, above the industry averages 6.5%.
  • D/E of 0.2 compared to the industry averages 0.4.
  • Book value per share has increased in each of the last 10 years, was $38.71 at the end of 2012.

Negatives

  • Geographic reach makes BHI susceptible to high currency rate risk.
  • Late mover in Russia and Middle East markets could hinder growth in those areas.
  • Operating margin of 10.3%, net margin of 6.1% and ROE of 8.0 all below the industry averages 14.7%, 8.7% and 12.0 respectively.
  • Negative free cashflow in the last three years.

Take Away

Baker Hughes seems to be making the right moves to satisfy customers and generate more profits. Shares currently trade in the middle of their 52 week high and lows. I personally favor Schlumberger for its more diversified products and larger reach but have mixed emotions here because I see a lot of growth in-store for Baker Hughes should management's changes be successful. Hopefully this earnings announcement will provide more information on how BHI's new products and strategy are performing.

Source: Baker Hughes Earnings Preview