Baker Hughes, A GE Company: A Tuck-Away Investment

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WG Investment Research


  • The company reported Q3 2017 results that missed top- and bottom-line estimates.
  • However, there were some positive takeaways from the company's quarterly results.
  • BHGE shares are a long-term buy.

The new Baker Hughes, A GE company (BHGE) has failed to impress the market since being created in July of 2017, which is shown by the fact that shares are down by over 10% over the last three months.

(Source: Nasdaq)

The company's recent operating results did not help the bull case for BHGE shares, but, in my opinion, investors with a long-term perspective should at least consider adding this company to their watch lists.

(Image Source)

Results, Nothing To Brag About

On October 20, 2017, BHGE reported adjusted Q3 2017 EPS of $0.05 on revenues of $5.4B, which were top- and bottom-line misses. The macro environment continued to be a headwind for BHGE, and it showed in the numbers.

(Source: Q3 2017 Presentation)

The Oilfield Equipment segment saw revenues decline by 28% YoY and its operating income percentage decrease by 14.6 pts, as the subsea market continued to be a challenging environment. Furthermore, management mentioned during the conference call that they see "little sign of any significant recovery" for this industry through at least 2018. Therefore, investors should begin to bake in expectations for a long tough road ahead for this business.

The Digital Solutions segment - a key growth driver for the new BHGE - also had a rough quarter, as the business unit had YoY declines in both revenues and operating income. Looking forward, however, investors should be encouraged by the segment's impressive 43% YoY growth in orders. Mr. Lorenzo Simonelli, CEO, mentioned that the management team fully expects for the company's Digital Solutions segment to begin to stabilize and return to growth in the near term.

As bad as BHGE's quarterly results were, I believe that there are several reasons to be optimistic about the company's long-term business prospects. To start, the company reported encouraging order numbers and had

This article was written by

WG Investment Research profile picture
Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long BHGE, GE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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