Shares of an oil and gas equipment and services company Baker Hughes (NASDAQ: BKR) rose 10.1% in July, according to data from S&P Global Market Intelligence. The rise came after an impressive earnings performance that showed a combination of good progress in operational improvements and margin expansion, as well as broad-based strength in industrial and energy technology (IET) orders. Here are the details.

Margin increase at Baker Hughes

The company operates in two segments. IET provides compression and power generation equipment for liquefied natural gas (LNG), natural gas and industrial applications. It also has a fast-growing new energy business (including carbon capture, hydrogen and clean energy solutions). The second segment, Oilfield Services and Equipment (OFSE), provides equipment and services for drilling, well construction and well maintenance and improvement.

Management targets an increase in OFSE earnings before interest, taxes, depreciation and amortization (EBITDA) from 16.9% to 20% by 2025. Management also targets an increase in IET’s EBITDA margin from 15% to 20% by 2026.

Of course, investors will be keeping an eye on progress toward these goals, and Baker Hughes reported good margin performance in both segments, with margins increasing both year-on-year and quarter-on-quarter.

Data source: Baker Hughes presentations.

CEO Lorenzo Simonelli attributed the continued margin improvement to the restructuring initiated in 2022, ongoing continuous improvement initiatives, improved supply chains and improved service levels.

Image source: Getty Images.

Balanced order growth

There was also good news on the orders side, with orders worth $7.5 billion in the quarter (compared to revenue of $7.1 billion) and IET orders worth $3.5 billion. In the IET space, Baker Hughes has been very successful with LNG orders in recent years, but this quarter it was non-LNG orders that took the lead, with record orders worth $1.4 billion.

The company’s energy orders also reached a record $445 million in the quarter and are now at $684 million for the first half (compared to $750 million for the full year of 2023), with management forecasting orders of $800 million to $1 billion for 2024. As a result, management expects energy orders to trend toward the upper end of the 2024 guidance range.

Image source: Getty Images.

What’s next for Baker Hughes

With continued margin expansion in both segments and good order growth in non-LNG and new energy solutions, Baker Hughes will have a strong 2024. Investments in LNG are likely to continue and the future looks bright for Baker Hughes. Add to that the upside potential of a new US administration taking a more free market approach to energy policy. Baker Hughes has upside potential, assuming energy prices remain at current levels.

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Lee Samaha does not own any stocks mentioned. The Motley Fool does not own any stocks mentioned. The Motley Fool has a disclosure policy.