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Baker Hughes Cut to Sell on North American Overdependence
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On Jun 15, oilfield services player Baker Hughes Incorporated was downgraded to a Zacks Rank #4 (Sell).
Key Factors
The persistent crude supply glut has been weighing on commodity prices for more than three years. In spite of this, U.S. shale players have been gathering on oil resources, adding more crude to the already oversupplied market. This led to the persistent decline in oil price. Most importantly, shale players are not ready to slash production despite the free fall in crude. If the trend continues, the commodity could fall below the $40 per barrel threshold which might slow down activity for U.S. shale drillers. This possibly will translate into fewer contracts for oilfield service players like Baker Hughes from exploration and production companies.
Baker Hughes, belonging to the Zacks categorized Oil & Gas-Field Services industry, has excessive exposure to the North American market from where it generates significant portion of its revenues. Business in the continent is most volatile and highly competitive. Given the volatility in crude prices and the expectation that oil will remain low, we raise questions over the company’s expectations of higher profit from the continent.
Moreover, over the last 60 days, the Zacks Consensus Estimate for second-quarter earnings has been revised down to a loss of 12 cents from a profit of 6 cents. Also, for 2017, the Zacks Consensus Estimate has been cut to earnings of 7 cents from 33 cents over the same period.
Coming to the earnings surprise history, Baker Hughes has a mixed record – it has missed estimates in two of the last four quarters, resulting in an average negative surprise of 13.48%. On top of that, the company lost 13.3% on a year-to-date basis.
Stocks to Consider
Better-ranked players in the energy sector include Canadian Natural Resources Limited (CNQ - Free Report) , McDermott International Inc. and W&T Offshore Inc. (WTI - Free Report) . Canadian Natural and McDermott sport a Zacks Rank #1 (Strong Buy), while W&T Offshore carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
We expect year-over-year earnings growth for Canadian Natural of almost 725% for 2017.
McDermott beat the Zacks Consensus Estimate in each of the trailing four quarters, the average positive surprise being 387.50%.
W&T Offshore had an average positive earnings surprise of 69.21% in the last four quarters.
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Baker Hughes Cut to Sell on North American Overdependence
On Jun 15, oilfield services player Baker Hughes Incorporated was downgraded to a Zacks Rank #4 (Sell).
Key Factors
The persistent crude supply glut has been weighing on commodity prices for more than three years. In spite of this, U.S. shale players have been gathering on oil resources, adding more crude to the already oversupplied market. This led to the persistent decline in oil price. Most importantly, shale players are not ready to slash production despite the free fall in crude. If the trend continues, the commodity could fall below the $40 per barrel threshold which might slow down activity for U.S. shale drillers. This possibly will translate into fewer contracts for oilfield service players like Baker Hughes from exploration and production companies.
Baker Hughes, belonging to the Zacks categorized Oil & Gas-Field Services industry, has excessive exposure to the North American market from where it generates significant portion of its revenues. Business in the continent is most volatile and highly competitive. Given the volatility in crude prices and the expectation that oil will remain low, we raise questions over the company’s expectations of higher profit from the continent.
Moreover, over the last 60 days, the Zacks Consensus Estimate for second-quarter earnings has been revised down to a loss of 12 cents from a profit of 6 cents. Also, for 2017, the Zacks Consensus Estimate has been cut to earnings of 7 cents from 33 cents over the same period.
Coming to the earnings surprise history, Baker Hughes has a mixed record – it has missed estimates in two of the last four quarters, resulting in an average negative surprise of 13.48%. On top of that, the company lost 13.3% on a year-to-date basis.
Stocks to Consider
Better-ranked players in the energy sector include Canadian Natural Resources Limited (CNQ - Free Report) , McDermott International Inc. and W&T Offshore Inc. (WTI - Free Report) . Canadian Natural and McDermott sport a Zacks Rank #1 (Strong Buy), while W&T Offshore carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
We expect year-over-year earnings growth for Canadian Natural of almost 725% for 2017.
McDermott beat the Zacks Consensus Estimate in each of the trailing four quarters, the average positive surprise being 387.50%.
W&T Offshore had an average positive earnings surprise of 69.21% in the last four quarters.
3 Top Picks to Ride the Hottest Tech Trend
Zacks just released a Special Report to guide you through a space that has already begun to transform our entire economy
Last year, it was generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for those who make the right trades early. Download Report with 3 Top Tech Stocks >>