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SunTrust Upgrades Baker Hughes After 'Several Solid Quarters'

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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

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.

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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Latest Ratings for BHGE

DateFirmActionFromTo
Sep 2018Morgan StanleyInitiates Coverage OnOverweight
Sep 2018Stifel NicolausInitiates Coverage OnBuy
Aug 2018B. Riley FBRUpgradesNeutralBuy

View More Analyst Ratings for BHGE
View the Latest Analyst Ratings

Posted-In: Ken Sill SunTrust Robinson HumphreyAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

 

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