Analysts At UBS Review Baker Hughes' Stand-Alone Strategy

UBS’s Angie Sedita mentioned that Baker Hughes Incorporated BHI's strategy became clear during the company’s conference call, which outlined the new international model that would have a less than 5 percent impact on revenue and should be offset by higher margin gains.

Sedita maintains a Buy rating on the company, with a price target of $55.

Stand-Alone Strategy

“BHI seeks growth opportunities from new international sales channels, 60 pending new technologies, and new business lines including subsea,” the analyst stated.

Sedita pointed out that the company was in the early stages of “rationalizing” some of its products in specific countries, which would impact less than 5 percent of the revenue and was expected to be offset by better profitability.

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“New international sales channels to sell de-emphasized products are still in development, but will focus on local service providers. However, the dominant model globally will remain “full-service”,” Sedita stated.

Baker Hughes is also looking to develop new markets, especially its subsea alliance with Aker.

Cost Cutting

Baker Hughes’ cost cutting initiatives are still in their early stages, with a more significant impact expected in 2H16 and further cost reductions in 2017, with greater focus on streamlining manufacturing operations and outsourcing.

Following the completion of the restructuring of the senior management team, additional global sales geomarkets are expected to decline from 20 to 9 “for a flatter organization.”

The company reported its EPS ahead of the consensus and the estimates.

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