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Here's Why Investors Should Steer Clear of Baker Hughes (BKR)

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Baker Hughes Company (BKR - Free Report) is grappling with the coronavirus-induced weak global energy demand. The oilfield service firm has seen its stock price plunged 50.2% year to date versus the industry’s 27.9% decline.

Factors Deterring the Stock

The outlook for energy equipment and services company Baker Hughes remains challenged since the company’s business is highly exposed to oil and gas price volatility. With the pricing environment for oil and gas prices remaining weak since 2020-beginning owing to the coronavirus pandemic, explorers and producers are removing rigs from oil and gas resources every month since upstream operations are less profitable. Hence, with lower allotted capital spending by explorers on upstream business, there has been a significant drop in demand for oilfield services and energy equipment. Baker Hughes, being an oilfield service provider, is likely to bear the brunt of low energy equipment demand. Hence, revenues from the company’s oilfield services unit are likely to keep declining.

Moreover, since 2017, Baker Hughes, currently carrying a Zacks Rank #5 (Strong Sell), hasn’t raised dividend payments. In fact, with oilfield service business continuing to be challenging, the company is unlikely to raise dividend payments in the near future.

Key Picks

A few better-ranked players in the energy sector are Cabot Oil Gas Corporation (COG - Free Report) , Apache Corporation (APA - Free Report) and WT Offshore, Inc. (WTI - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cabot Oil Gas has seen upward earnings estimate revisions for 2020 in the past 30 days.

Apache has seen upward estimate revisions for its 2020 bottom line in the past 30 days.

WT Offshore has seen upward estimate revisions for its 2020 bottom line over the past 60 days.

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