SunTrust Upgrades Baker Hughes After 'Several Solid Quarters'


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Better-than-expected second-quarter operating income has improved SunTrust Robinson Humphrey's optimism regarding Baker Hughes A GE Co (NYSE:BHGE)’s earnings power.

The Analyst

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Analyst Ken Sill upgraded Baker Hughes from Hold to Buy and raised the stock’s price target from $34 to $39.

The Thesis

“Several solid quarters have reduced our concerns about the potential impact of mid-level management departures from the Baker side of the business," Sill said in a Tuesday note. (See the analyst's track record here.) 

On Friday's earnings call, Baker Hughes management was cautious given the company’s exposure to late-cycle production and infrastructure spending, the analyst said.

Stronger-than-expected orders and a 1.1-to-1 book-to-bill ratio demonstrate how the company’s offshore and international businesses are “turning the corner," Sill said.


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Baker Hughes also faces less exposure to a potential slowdown in Permian completions than peers, according to SunTrust. 

“BHGE's direct exposure to pressure pumping comes primarily from a minority interest.”

Continuing improvement in subsea, and expected growth in Baker Hughes' drilling-related and artificial lift businesses should reduce the potential impact of Permian completions activity, Sill said. 

Price Action

Baker Hughes shares were trading up 1.5 percent to $32.99 at the time of publication Tuesday.

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27% profit every 20 days?

This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.


Posted In: Analyst ColorUpgradesPrice TargetAnalyst RatingsKen SillSunTrust Robinson Humphrey