RBC Capital Markets Downgrades Baker Hughes to Sector Perform from Outperform, Drops PT from $67.00 to $60.00

In a report published Wednesday, RBC Capital Markets analyst Kurt Hallead downgraded Baker Hughes Incorporated

to Sector Perform from Outperform, dropping its price target to $60.00 from $67.00. According to the report, BHI's NAM margins will progress at a more modest pace than originally anticipated. NAM margins are now forecasting averaging 11.9% in 2014 vs. 13.1% previously. Revenue estimates, as well as operating margin estimates for other regions, are unchanged. BHI has outperformed the OSX by ~6% since mid August. “In 4Q, the company stated that Canadian activity has not progressed as expected and improvement in US pressure pumping will not offset NAM seasonality,” the report noted. “Investors were hoping for BHI to exit '13 with NAM margins in the teens, so we think the lack of margin progression may cause some to be wary.” BHI is in process of resuming operations in Iraq after a security disruption caused BHI to shut down operations in the southern part of the country in early November, the report said. It is estimated that this will lead to an EPS impact of ~$0.09 for the quarter. However, we think that BHI is on track to have operations fully functional by year-end and do not expect any additional impact in 2014. BHI closed Tuesday at $52.79.