Baker Hughes, based in Houston, rose 9.2 percent to $45.59 at the close in New York, the most since June 10, 2010.
Net income rose 30 percent to $439 million, or $1 a share, Baker Hughes said today in a statement today. That’s 23 cents better than the average of 27 analysts’ estimates compiled by Bloomberg. Revenue from North American operations rose 13 percent from a year earlier, to $2.67 billion.
“An impressive beat,” JPMorgan Chase & Co. analyst J. David Anderson wrote today in a note to clients. JPMorgan rates the shares at neutral, equivalent to a hold. “North American land issues seem to be stabilizing ahead of expectations.”
Margins in the region are expected to be “flat to slightly up” in the third quarter, Chief Financial Officer Peter Ragauss told analysts and investors today on a conference call.
Baker Hughes has been working on reducing costs and improving utilization in its hydraulic-fracturing business in North America after customers shifted from natural-gas basins to oil fields. The company in the past has attributed much of its fracking-business frustrations to being late to acquire much of the necessary materials and logistics to do the work.
Baker Hughes’ so-called “self-help” measures, such as improving its supply chain for fracking, “helped prop up margins,” Luke Lemoine, an analyst at Capital One Southcoast, wrote today in a note to investors. “But we wouldn’t get too carried away,” because fracking price cuts in the Bakken and Permian formations have yet to fully impact the earnings, he wrote.
The company’s costs for a fracking material known as guar are expected to rise in the third quarter and erode margins for that business after prices reached a “peak” of $12 a pound in the second quarter, Chief Executive Officer Martin Craighead said on the call. For the most part, the company was unable to pass the cost increases on to its customers, Ragauss said.
Guar gum, made from beans, is used to blend materials in hydraulic fracturing.
The shares, which have 14 buy and 16 hold ratings from analysts, have fallen 6 percent this year.
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