Baker Hughes Incorporated's Record Earnings Overshadowed by Pink Slips

By Matt

Baker Hughes Incorporated reported strong fourth-quarter results today. However, the enthusiasm was dimmed by a massive round of job cuts announced by the oil-field services giant. The company is clearly digging in for what it sees as a tumultuous 2015.

Drilling down into the resultsBaker Hughes delivered record-breaking financial results in the fourth quarter. The company announced record revenue of $6.6 billion in the fourth quarter, which was up 6% from the third quarter. It also set a record for adjusted earnings per share, which hit $1.44 in the quarter and was up 41% from the third quarter. Finally, free cash flow set a record as the company generated $1.6 billion during 2014. Overall, Baker Hughes obliterated analysts' estimates in the quarter as its earnings beat estimates by $0.37 per share while revenue was $190 million higher than expected.

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In commenting on the quarter, CEO Martin Craighead noted that the company's results...

Clearly, the company was firing on all cylinders during 2014. However, as Craighead noted, there are increasing concerns of challenging market conditions, which will act as a major headwind during 2015.

Preparing for a stormIn order to prepare for the challenges of the year ahead, Baker Hughes announced a massive round of layoffs. The company is laying off 7,000 employees in the first quarter of 2015 as it reacts to the drilling slowdown that it's expecting to see in 2015 as oil producers idle drilling rigs in response to low oil prices.

Craighead commented on the current market conditions:

He notes that the company is being proactive by adjusting its workforce to manage through the challenges it sees in the year ahead. However, he does point out that the company's financial position is strong, and its strategy remains unchanged. This includes its merger with Halliburton Company , which remains on track to close later on in the year.

Investor takeawayBaker Hughes delivered a record quarter, but it doesn't expect that to continue in 2015. Instead, it's bracing itself for a rough patch and is proactively reducing its headcount to better align with expected activity. Meanwhile, it remains on track to merge with Halliburton in 2015 as the two oil-field service giants look to emerge from the downturn as a thriving entity that's poised to deliver strong long-term results.

The article Baker Hughes Incorporated's Record Earnings Overshadowed by Pink Slips originally appeared on

Matt DiLallo has no position in any stocks mentioned, but was really impressed with the numbers Baker Hughes put up this quarter. The Motley Fool recommends Halliburton. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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