Baker Hughes (BHGE) reports quarterly earnings January 23rd. Analysts expect revenue of $6.07 billion and EPS of $0.27. The revenue estimate implies 7% growth sequentially. Investors should focus on the following key items.

North America Could Stymie BHGE

Over the past few years oil prices have melted up just like stocks. I always found it difficult to believe global demand for oil was pushing up prices. At some point, consumer demand and not external forces (like OPEC supply cuts) could drive oil prices. That time could be upon us. Last month Schlumberger (SLB) rang the alarm on North America and suggested Q4 revenue from the region could fall by double-digits Q/Q. North America has been white-hot over the past few years; companies like Schlumberger, Baker Hughes and Halliburton (HAL) with sizable presences in North America land drilling have been highly successful. If you believe Schlumberger, that could soon change.

Baker Hughes’ Q3 2018 revenue of $5.7 billion was up 2% sequentially. A proxy for North America exposure could be the company’s short cycle businesses – Oilfield Services and Digital Solutions. Their combined revenue was $3.6 billion, up 3% Q/Q. Schlumberger’s revenue from North America was up 2%, while Halliburton’s fell 2%. North America exposure as a percentage of total revenue was 64%, 61% and 38% for Baker Hughes, Halliburton and Schlumberger, respectively.

In effect, Baker Hughes could have the most to lose if E&P and revenue from the region falls hard in Q4 or in the first half of 2019. Read more:

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