Oilfield services provider Baker Hughes (BHI) will release its Q2 results on July 20. We expect Baker Hughes to report low growth and declining margins in the North America geography, which contributes a major portion of its overall valuation. Low natural gas prices in the U.S. have resulted in a major realignment in the exploration and production (E&P) industry in the region. Additionally, the industry margins have suffered because of logistical and operational changes, as well as the rising cost of key input prices. International revenues are expected to show sequential as well as annual growth.

We will revisit our $56.42 price estimate for Baker Hughes, which is at a 40% premium to the current market price, after the earnings result.

North American slowdown

Energy prices saw a fall in the past quarter as natural gas prices in the U.S. declined to their lowest level in the past decade, forcing producers to cut production activity in gas plays and instead focus on liquids production.

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