Baker Hughes Earnings: Management Slightly Raises 2023 Guidance; Several Years of Growth Ahead

Baker Hughes BKR delivered another strong performance in the third quarter, with significant contributions from its industrial energy technologies, or IET, segment as LNG contracting activity continues accelerating around the world. The firm slightly raised guidance for fiscal 2023, with the midpoint for revenue and adjusted EBITDA both increasing about 1% compared to last quarter’s outlook. The firm is now on track to deliver more nearly $25.7 billion in sales for 2023, a 21% year-over-year increase, while lifting its adjusted EBITDA margin by about 50 basis points to 14.6%. We’re slightly raising our fair value estimate to $35 following results, and we maintain our no-moat rating.

Baker Hughes’ oilfield services business performed well this quarter, with revenues and profitability up slightly quarter over quarter, about 2% and 60 basis points, respectively. However IET led the charge this quarter, with segment revenues up 10% sequentially, driving nearly 80% of Baker Hughes’ overall topline growth. Robust demand for new LNG capacity around the world has driven substantial growth in the segment, which is on track to post nearly $10.3 billion of revenues this year, a level not seen since 2015. IET book-to-bill exceeded 100% for the ninth straight quarter, and full year order intake will very likely exceed $14 billion. A robust backlog support long-term growth in IET, fortified by elevated order intake over the next several years. LNG capacity forecasted to expand about 70% by 2030, and as the main supplier of liquefaction trains, Baker Hughes will likely secure a very high proportion of new contracts moving forward.