Market Overview

SunTrust Upgrades Baker Hughes After 'Several Solid Quarters'

SunTrust Upgrades Baker Hughes After 'Several Solid Quarters'
Morgan Stanley: Multiple Expansion Across Oilfield Services Sector Likely Amid Broadening Global Capex Upcycle
Benzinga's Top Upgrades, Downgrades For September 11, 2018
Baker Hughes, A GE Company: The Heart Of The Business (Seeking Alpha)

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

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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