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Reasons Why You Should Hold on to Baker Hughes (BKR) Stock Now
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Baker Hughes Company (BKR - Free Report) has witnessed upward earnings estimate revisions for 2023 in the past 60 days.
The company, currently carrying a Zacks Rank #3 (Hold), has gained 7% in the past six months against the 7.7% decline of the composite stocks belonging to the industry.
Image Source: Zacks Investment Research
What’s Favoring the Stock?
The West Texas Intermediate crude price is trading at the $70-per-barrel mark, which is highly favorable for exploration and production activities.
Strong oil prices will likely pave the way for further rig additions despite a slowdown in drilling activities, as upstream energy players mainly focus on stockholder returns than boosting production.
Higher exploration and production activities will lead to improved demand for oilfield service players like Baker Hughes. In 2023, the company expects revenues of $14.5-$15.5 billion from the Oilfield Services and Equipment unit, indicating an increase from the $13.2 billion reported in 2022.
Baker Hughes predicts significant growth from a series of profitable international liquefied natural gas (LNG) contracts. With the growing demand for clean energy, countries across the world are actively investing in LNG terminals. Notably, the oilfield service player expects to receive massive orders for LNG equipment this year.
Baker Hughes is strongly committed to returning capital to shareholders and has been a reliable dividend payer in the past two years. Compared with the composite stocks belonging to the industry, BKR has been consistently paying higher dividend yields over the past two years.
Baker Hughes has a strong balance sheet. The company’s cash balance of $2,415 million can easily clear the short-term debt of $684 million, reflecting a strong liquidity profile. BKR’s debt-to-capitalization ratio has consistently been lower than the composite stocks belonging to the industry over the past two years.
Given these tailwinds, Baker Hughes, one of the leading oilfield service players in the United States, is poised for an upside in the coming days.
Risks
In 2022, Baker Hughes generated a free cash flow of $1.1 billion, indicating a decline from the $1.8 billion reported a year ago. This reflects weakness in the company’s operations. The recessionary pressures in some of the world’s largest economies may impact the company’s ability to generate consistent positive cash flows.
Seadrill is a market-leading international driller with strong exposure in key strategic basins like the U.S. Gulf of Mexico, Brazil and Angola. SDRL reported first-quarter 2023 earnings of 83 cents per share, beating the Zacks Consensus Estimate of 55 cents.
Seadrill has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 60 days. The consensus estimate for SDRL’s 2023 and 2024 earnings is pegged at $2.93 per share and $4.01 per share, respectively.
Evolution Petroleum is an independent energy company. EPM reported first-quarter 2023 earnings of 42 cents per share, beating the Zacks Consensus Estimate of 17 cents.
Evolution Petroleum has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 60 days. The consensus estimate for EPM’s 2023 and 2024 earnings is pegged at $1.11 and $1.05 per share, respectively.
PHX Minerals is an oil and natural gas mineral company. The company posted first-quarter 2023 earnings of 11 cents per share, beating the Zacks Consensus Estimate of 7 cents.
PHX has witnessed upward earnings estimate revisions for 2024 in the past 60 days. The consensus estimate for the company’s 2023 and 2024 earnings per share is pegged at 28 cents and 45 cents, respectively.
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Reasons Why You Should Hold on to Baker Hughes (BKR) Stock Now
Baker Hughes Company (BKR - Free Report) has witnessed upward earnings estimate revisions for 2023 in the past 60 days.
The company, currently carrying a Zacks Rank #3 (Hold), has gained 7% in the past six months against the 7.7% decline of the composite stocks belonging to the industry.
Image Source: Zacks Investment Research
What’s Favoring the Stock?
The West Texas Intermediate crude price is trading at the $70-per-barrel mark, which is highly favorable for exploration and production activities.
Strong oil prices will likely pave the way for further rig additions despite a slowdown in drilling activities, as upstream energy players mainly focus on stockholder returns than boosting production.
Higher exploration and production activities will lead to improved demand for oilfield service players like Baker Hughes. In 2023, the company expects revenues of $14.5-$15.5 billion from the Oilfield Services and Equipment unit, indicating an increase from the $13.2 billion reported in 2022.
Baker Hughes predicts significant growth from a series of profitable international liquefied natural gas (LNG) contracts. With the growing demand for clean energy, countries across the world are actively investing in LNG terminals. Notably, the oilfield service player expects to receive massive orders for LNG equipment this year.
Baker Hughes is strongly committed to returning capital to shareholders and has been a reliable dividend payer in the past two years. Compared with the composite stocks belonging to the industry, BKR has been consistently paying higher dividend yields over the past two years.
Baker Hughes has a strong balance sheet. The company’s cash balance of $2,415 million can easily clear the short-term debt of $684 million, reflecting a strong liquidity profile. BKR’s debt-to-capitalization ratio has consistently been lower than the composite stocks belonging to the industry over the past two years.
Given these tailwinds, Baker Hughes, one of the leading oilfield service players in the United States, is poised for an upside in the coming days.
Risks
In 2022, Baker Hughes generated a free cash flow of $1.1 billion, indicating a decline from the $1.8 billion reported a year ago. This reflects weakness in the company’s operations. The recessionary pressures in some of the world’s largest economies may impact the company’s ability to generate consistent positive cash flows.
Stocks to Consider
Some better-ranked players in the energy space are Seadrill Limited (SDRL - Free Report) , Evolution Petroleum Corporation (EPM - Free Report) and PHX Minerals Inc. (PHX - Free Report) . SDRL and EPM currently sport a Zacks Rank of 1 (Strong Buy), and PHX carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Seadrill is a market-leading international driller with strong exposure in key strategic basins like the U.S. Gulf of Mexico, Brazil and Angola. SDRL reported first-quarter 2023 earnings of 83 cents per share, beating the Zacks Consensus Estimate of 55 cents.
Seadrill has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 60 days. The consensus estimate for SDRL’s 2023 and 2024 earnings is pegged at $2.93 per share and $4.01 per share, respectively.
Evolution Petroleum is an independent energy company. EPM reported first-quarter 2023 earnings of 42 cents per share, beating the Zacks Consensus Estimate of 17 cents.
Evolution Petroleum has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 60 days. The consensus estimate for EPM’s 2023 and 2024 earnings is pegged at $1.11 and $1.05 per share, respectively.
PHX Minerals is an oil and natural gas mineral company. The company posted first-quarter 2023 earnings of 11 cents per share, beating the Zacks Consensus Estimate of 7 cents.
PHX has witnessed upward earnings estimate revisions for 2024 in the past 60 days. The consensus estimate for the company’s 2023 and 2024 earnings per share is pegged at 28 cents and 45 cents, respectively.