When oilfield services company Baker Hughes Co. (NYSE: BKR) reported fourth-quarter results on Wednesday, it became the sole member of a club comprised of big oilfield services companies that posted an annual profit. Sure, it was just $124 million, but competitors Schlumberger N.V. (NYSE: SLB) and Halliburton Co. (NYSE: HAL) posted fiscal year losses of $10.1 billion and $1.1 billion, respectively.
So even though Baker Hughes’s earnings missed estimates and revenues could have been better, the now-independent company did all right. It’s separation from General Electric Co. (NYSE: GE) last year provided the faltering industrial giant with some much-needed cash and Baker Hughes with control over its own fate.
The quarterly earnings report moved several analysts’ firms to make some changes in their views of Baker Hughes. Here’s a rundown of key changes to price targets and ratings.
Credit Suisse maintained an Outperform rating on the stock and a $28 12-month price target. Calling Baker Hughes a “top pick for us,” the analysts acknowledged downward earnings revisions and an overhang from remaining GE stock ownership (around $9 billion of a market cap of about $23.5 billion). Credit Suisse calls the company’s strength in liquefied natural gas (LNG) equipment a “moat” and touts the November announcement with artificial intelligence provider C3.ai as a deal that can “drive internal cash conversion efficiencies.” The firm did lower its 2020 earnings per share estimate from $1.30 to $1.02, largely driven by a higher book tax rate.
Merrill Lynch reiterated its Buy rating and $34 per share price objective. The analysts believe that a 1% margin expansion in the oilfield services business will add $1.00 to the share price. Similar margin expansion in oilfield equipment could add $0.50 a share. Expanding the industrial and downstream markets offers an additional $2.00 in earnings per share, and the deal with C3.ai provides a possible “4.50/shr of BKR value via cost savings and capitalizing on value creation.”
CFRA downgraded the stock from Buy to Hold and reduced its 12-month price target from $25 to $24 per share, reflecting a 6.0× multiple of price to projected 2020 operating cash flow, a discount to the company’s historical forward average. The analysts noted: “Our revised opinion is influenced by our view of slower progression on margin expansion than anticipated, up 20 basis points sequentially, but down 90 [bps] YoY due to slower U.S. land activity and Gulf of Mexico, as well as lower product sales. We expect separation costs [from GE] to continue to stunt margin growth in 2020.”
Three other firms lowered their price targets on Baker Hughes:
- Cowen from $34 to $33
- Scotiabank from $32 to $29
- Susquehanna from $27 to $26
Baker Hughes stock traded up about 1.2% just before noon on Thursday, at $22.96 in a 52-week range of $1.18 to $28.65. The stock’s 12-month consensus price target is $29.25, and its dividend yield is 3.17%.
24/7 Wall St.Travel Cards Are Getting Too Good To Ignore
Credit card companies are pulling out all the stops, with the issuers are offering insane travel rewards and perks.
We’re talking huge sign-up bonuses, points on every purchase, and benefits like lounge access, travel credits, and free hotel nights. For travelers, these rewards can add up to thousands of dollars in flights, upgrades, and luxury experiences every year.
It’s like getting paid to travel — and it’s available to qualified borrowers who know where to look.
We’ve rounded up some of the best travel credit cards on the market. Click here to see the list. Don’t miss these offers — they won’t be this good forever.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
