NEW YORK ( TheStreet) -- The four major oil service stock plays have now reported fourth quarter earnings, and only Baker Hughes ( BHI) has managed to engineer a rally to a new 52-week high, in what's a big comeback for the previous oil service group underperformer.

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Schlumberger ( SLB) and Halliburton ( HAL) both beat the Street expectations, but failed to attain new 52-week high levels when they reported. Schlumberger's earning beat fizzled within a few hours on Friday, and Halliburton shares barely nudged higher on the strength of another strong earnings report.

Weatherford International ( WFT) reported a less-than-clean earnings, and a few one-time items -- nothing new for Weatherford -- made for a headline earnings miss that had shares off by close to 3% on Tuesday. Weatherford wasn't helped by an energy sector selloff -- energy declined by more than 1% on Tuesday, much steeper than the broad market loss. Schlumberger was down another 1.7% in the early afternoon, while Halliburton remained close to flat in trading.

Yet amid the tepid reaction to another round of earnings from oil-service stocks, Baker Hughes is up 6% on Tuesday. Unlike the other oil-service stocks, which have given back 52-week high levels attained in December, Baker Hughes hit a new 52-week high on Tuesday, at $61.74 intraday. Trading of more than 10 million shares in the early afternoon was three times the average volume for what has been the underperformer among oil-service stock plays.

Being the trailing stock in its peer group is part of the reason for the sustained rally in Baker Hughes shares, and where Baker Hughes had trailed was in its margin performance. Baker Hughes showed improved operating margins in every geographic region in the fourth quarter, and after what one analyst described as a dismal margin performance in the third quarter, the margin rebound was exactly what Baker Hughes needed to move shares higher.

In North America, Baker Hughes margins increased by 5%; while international margins increased by 3.75% on a consolidated basis.

The margin improvement led to earnings per share of 84 cents per share, a huge beat of the Street consensus, which was at 65 cents.

In terms of the business fundamentals, Baker Hughes was on par with its peers.

North America remained a bright spot, while the international markets are recovering. But the pace of recovery remains a wildcard. The dichotomy between strength in North America and uncertain recovery internationally remains the fundamental thematic divide for the oil-service stocks, and Baker Hughes was the only stock in the group to engineer a fourth-quarter report that distanced itself based on other factors.

Phil Weiss, analyst at Argus Research, wrote in an email to TheStreet, "All three (BHI, SLB, HAL) saw improved business results. International is starting to turn. North America (especially U.S. land) remains strong. With Baker, there are some nice positives as far as margins go. The benefits from the integration of the two businesses are also a positive."

Baker Hughes' acquisition of BJ Services had previously run into execution issues, and the jury was still out on Baker Hughes coming into the fourth-quarter earnings. Even though it had risen in trading since the summer along with the group, it's rise was slightly trailing the sector return.

Darren Gacicia, analyst at Dahlman Rose, said the key takeaway from the oil-service earnings reports was a catch-up by Baker Hughes in terms of forward-looking margin expectations. The analyst said that he expects mid-20s margins in the future from Schlumberger and Halliburton, but before Tuesday, he didn't expect any better than mid-teens for Baker Hughes.

"This is a massive step change in expectations," Gacicia said.

Baker Hughes was at a 15% operating margin in the fourth quarter.

"It looks like after the third quarter call they started to execute on streamlining the business and margin improvement, and with the hurdle rate set lower after a bad quarter, they are starting to move in the direction of the other guys," Gacicia added.

Argus Research's Weiss agreed in principal, writing, "I know that I put myself in the 'I want to see evidence of margins improving before I start to believe they can.' Management was behind schedule in delivering on improved margins, so there could be a coiled spring effect where the stock's gains were more limited and then when targets were exceeded it uncoils and springs higher. BHI restructured and made an acquisition around the same time. It took longer than management thought to get things moving forward." Weiss surmised.

This doesn't mean it's onwards and upwards with Baker Hughes shares from here on out. It just means that Baker Hughes was able to answer some of its critics and sustain an earnings rally to a new 52-week high while its peers fell short of setting an already high bar higher.

Baker Hughes still faces a period of trade consolidation, as Dahlman Rose's Gacicia calls it, during which there may still be swings in its shares as fast money exits and long-term positions consolidate in the sector -- a trend to which all the oil service shares remain vulnerable.

Argus Research's Weiss also worries about the macroeconomic recovery staying on track. "Baker Hughes management sounded pretty bullish on the call today. The only thing that tempers my enthusiasm is what happens if higher oil and gas prices end up putting a crimp on the economic recovery. That's the one thing that restrains my enthusiasm a bit," the analyst cautioned.

-- Written by Eric Rosenbaum from New York.


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