* Q3 adjusted EPS $1.18 vs Street view $1.22
* Outlook intact, but oil prices weigh down entire sector
* Int'l margin disappointment hammers shares, down 10 pct
By Braden Reddall
Nov 1 (Reuters) - Baker Hughes Inc , the No. 3 oilfield services company, posted a quarterly profit short of estimates on a sharp reversal of its international margin growth, sending its stock down 10 percent.
The turnaround in profitability outside North America has been a much-touted target for the U.S. company, and growing confidence in its executives' ability to deliver on it had attracted many new investors.
"Ugly, (it) will be rough day for the stock," was the early assessment of Tudor Pickering Holt, a Houston investment bank.
JPMorgan analysts said weaker oil prices on Tuesday, which led to a 4.2 percent drop in the Philadelphia oil service index , would only add to the impact of Baker's disappointment on earnings and margins.
Baker still expects 15 percent international margins this quarter despite a drop of more than a percentage point between the second and third quarters to 12.2 percent, which it blamed on weakness in Europe, and Norway in particular.
"We feel pretty confident that the fourth quarter will be there if we just deliver the product that's been sold," said Chairman and Chief Executive Chad Deaton, who hands off his CEO title to Martin Craighead at the end of this year.
Craighead said on a call with analysts that all its clients, from independents to national oil companies, were confident about international activity for 2012. He expected the Middle East would make the strongest showing in profits next year, led by Saudi Arabia.
But Deaton flagged recent fluctuations in oil and foreign exchange markets as a challenge, with U.S. oil prices falling 17 percent last quarter on fears of a recession and sovereign debt crisis.
Third-quarter net profit more than doubled to $706 million, or $1.61 a share, from $255 million, or 59 cents a share, a year earlier. Excluding one-time items including a tax reorganization gain, Baker made $1.18 a share, below the $1.22 that analysts expected, according to Thomson Reuters I/B/E/S.
Revenue grew 27 percent to $5.18 billion.
Earnings estimates for oilfield-geared stocks already were cut following the sobering views of the quarters ahead from industry leaders Schlumberger and Halliburton Co that came along with their results.
Baker said strong growth continued in U.S. onshore basins, with capacity generally tight and only a few natural gas-heavy areas showing pricing softness.
Baker said the pace of Gulf of Mexico activity improved marginally. Offshore rig contractor Rowan Cos Inc was optimistic on dayrates, but its profit fell short of estimates partly due to higher maintenance costs.
Shares of Baker Hughes dropped 10 percent to $52.04 on Tuesday in early trading on the New York Stock Exchange. The stock had mirrored the sector by rising by as much as a third in October with last month's recovery in oil prices.