Baker Hughes Company ((BKR)) has held its Q1 earnings call. Read on for the main highlights of the call.
Baker Hughes’ latest earnings call painted a mixed picture, highlighting strong performance in certain segments while acknowledging challenges in others. The company celebrated significant achievements in Industrial & Energy Technology, LNG, and data centers, but also expressed caution due to ongoing challenges in the oil markets, tariff uncertainties, and reduced upstream spending.
Strong First Quarter Results
Baker Hughes reported strong first quarter results, meeting or exceeding the midpoint of their EBITDA guidance for the ninth consecutive quarter. The company set new records for revenue and adjusted measures of EPS, EBITDA, and EBITDA margin, showcasing its operational efficiency and strategic execution.
Industrial & Energy Technology (IET) Performance
The IET segment had a robust start to the year, booking $3.2 billion in orders and reaching a record backlog of $30.4 billion. Adjusted EBITDA for this segment increased by 10% year-over-year, with a notable 30% increase in IET EBITDA, underscoring the segment’s growth potential and strategic importance.
LNG and Data Center Momentum
Baker Hughes made significant strides in the LNG sector, securing $1.7 billion in orders over the past two quarters. Additionally, the company entered the data center market, booking orders for over 350 megawatts of power, indicating a strategic diversification into new growth areas.
Resilient Balance Sheet
The company ended the first quarter with a strong balance sheet, holding $3.3 billion in cash, a net debt-to-EBITDA ratio of 0.6x, and liquidity of $6.3 billion. This financial resilience positions Baker Hughes well to navigate market uncertainties.
Continued Margin Improvement
Despite a decline in revenue, the OFSE segment showed an improvement in EBITDA margin rate to 17.8%, an 80 basis point increase year-over-year. This reflects the company’s focus on operational efficiency and cost management.
Challenges in Oil Markets
The oil markets faced downward pressure as OPEC+ returned 2.2 million barrels per day to the market, increasing volatility and impacting global GDP and oil demand. This poses a significant challenge for Baker Hughes’ oil-related segments.
Tariff and Trade Policy Uncertainty
Baker Hughes highlighted the potential impact of tariffs, estimating a net EBITDA impact between $100 million and $200 million. Ongoing trade negotiations add a layer of uncertainty to the company’s financial outlook.
Weakness in OFSE Revenue
The OFSE segment experienced a 10% sequential revenue decline due to enhanced seasonal weakness and delayed discretionary spending, particularly in international markets. This underscores the challenges in maintaining revenue growth in a volatile market.
Reduced Upstream Spending
Global upstream spending is expected to decline by high-single digits in 2025, with international markets facing a mid- to high-single-digit decline and North America seeing a low-double-digit decrease. This trend poses a challenge for Baker Hughes’ growth prospects in the upstream sector.
Forward-Looking Guidance
Looking ahead, Baker Hughes provided guidance shaped by a complex macroeconomic environment, including geopolitical tensions and oil price volatility. The company projected a high-single-digit decline in global upstream spending for 2025 but maintained confidence in its IET segment, reaffirming its full-year EBITDA guidance range of $2.2 billion to $2.4 billion. The OFSE segment faces more variability due to reduced upstream spending and tariff-related cost inflation. Overall, Baker Hughes is focused on driving productivity and achieving structural margin improvements, targeting a 16.1% adjusted EBITDA margin, up 140 basis points from the previous year.
In summary, Baker Hughes’ earnings call reflected a balanced sentiment, celebrating strong performances in key segments while acknowledging challenges in the oil markets and trade policies. The company’s strategic focus on Industrial & Energy Technology and its resilient balance sheet provide a solid foundation to navigate future uncertainties. Investors will be keen to see how Baker Hughes leverages its strengths to overcome the challenges ahead.