Market Overview

Stephens: Baker Hughes' Near Term Could Be 'Sloppy'

Share:
Stephens: Baker Hughes' Near Term Could Be 'Sloppy'
Related BHI
Benzinga's Top Upgrades, Downgrades For April 26, 2017
Earnings Scheduled For April 25, 2017
Q1 GDP Report, GM, Exxon, Chevron Lead Investing Action Plan (Investor's Business Daily)
Related HAL
Mid-Afternoon Market Update: Dow Up Over 200 Points; Ocean Power Technologies Shares Surge
Mid-Day Market Update: C R Bard Surges On Acquisition News; XOMA Shares Plunge
Rothschild Capital Partners, LLC Buys SPDR Select Sector Fund - Utilities, SPDR Select Sector ... (GuruFocus)

Baker Hughes Incorporated (NYSE: BHI) reported its 1Q results, underperforming its peers.

Stephens’ Matthew Marietta downgraded the rating on the company from Overweight to Equal-Weight, while lowering the price target from $64 to $39.

“While LT potential for stand-alone success remains, we think the last ~1.5 years of uncertainty and distraction will take time to clean up as the potential trough materializes,” Marietta mentioned.

1Q Underperformance

Baker Hughes reported 21 percent quarter on quarter revenue declines for 1Q, as compared to the 16 percent decline reported by Schlumberger Limited. (NYSE: SLB) and the 17 percent decline posted by Halliburton Company (NYSE: HAL).

Related Link: SocGen Concerned About Schlumberger: Downgrades On "Lofty" Valuation

Baker Hughes also meaningfully underperformed in terms of operating margins, which came in at 9.2 percent.

According to the Stephens report, “BHI expects NAM rig count to decline (30 percent) q/q in 2Q and while rig count could stabilize around mid-year, activity is not expected to increase meaningfully in 2016; Int'l rig count is expected to decline steadily through 2016.”

Merger Outlook

Given the delay of Halliburton’s call to after the April 30 deadline, and “reading into language in both HAL and BHI's reports coupled with a fairly ominous report issued by the DOJ, we now see significant risk to deal closure which marks a full shift in our prior position,” Marietta stated.

The revenue, EBITDA and adjusted EPS estimates for 2Q16, 2016 and 2017 have been lowered.

Latest Ratings for BHI

DateFirmActionFromTo
Apr 2017BMO CapitalDowngradesOutperformMarket Perform
Apr 2017HSBCInitiates Coverage OnHold
Feb 2017SusquehannaUpgradesNeutralPositive

View More Analyst Ratings for BHI
View the Latest Analyst Ratings

Posted-In: Analyst Color Earnings Long Ideas News Downgrades Price Target Commodities Markets Best of Benzinga

 

Related Articles (BHI + HAL)

View Comments and Join the Discussion!