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Baker Hughes to Divest NGS Business for $375M via 2 Deals
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Baker Hughes , a GE company, recently agreed to divest its Natural Gas Solutions (“NGS”) business for a total of $375 million, through two separate deals. The buyers of the assets are First Reserve Corporation, a private-equity firm and Pietro Fiorentini S.p.A., which provides natural gas regulating and metering components.
NGS belongs to Baker Hughes’ Turbomachinery & Process Solutions (“TPS”) segment that primarily supplies natural gas regulating and related products like pipeline repair products, gas meters, chemical injection pumps, electric actuators and others.
Divestment Rationale
The divestment is in line with the company’s strategy of streamlining its portfolio and creating maximum value for investors. Notably, operating income from the TPS segment, which includes the NGS business, is on the decline since the last few quarters. In fact, in first-quarter 2018, operating income from the segment was $119 million, down 24% sequentially and 53% year over year. Also, the Zacks Consensus Estimate for second quarter operating income from this segment stands at $126 million, down 6.3% year over year.
The decision to divest NGS came following last month’s announcement of separating Baker Hughes from its parent company General Electric Company (GE - Free Report) , which is planning to lower exposure in the volatile energy sector and increase focus on aviation, power and renewable energy businesses. Over the next two to three years, General Electric will likely sell its 62.5% stake in Baker Hughes to strengthen its balance sheet and simplify operations.
Deal Details
NGS product line along with its 450 employees (approximately), will be transferred to First Reserve, once the deal closes. Another deal with Pietro Fiorentini enables Baker Hughes to divest the Talamona branch of NGS, which incorporates a manufacturing site in Talamona, Italy that has around 40 workers. The deals, awaiting necessary regulatory approvals, are expected to close in the second half of this year. The individual financial details of the agreements are yet to be disclosed.
Price Performance
Houston, TX-based oilfield service provider, Baker Hughes has lost 10.9% in the past year compared with 8.8% fall of its industry.
Zacks Rank and Stocks to Consider
Baker Hughes currently carries a Zacks Rank #4 (Sell). Investors interested in the Energy sector can opt for some better-ranked stocks like BP p.l.c. (BP - Free Report) and EOG Resources, Inc. (EOG - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
London-based BP is an integrated energy company. The company’s top line for 2018 is anticipated to improve 12.6% year over year, while its bottom line is expected to increase 77.7%.
Houston, TX-based EOG Resources is an upstream energy company. The company’s top line for 2018 is anticipated to improve 41.2% year over year. In the last four reported quarters, the company recorded an average positive earnings surprise of 30.1%.
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Baker Hughes to Divest NGS Business for $375M via 2 Deals
Baker Hughes , a GE company, recently agreed to divest its Natural Gas Solutions (“NGS”) business for a total of $375 million, through two separate deals. The buyers of the assets are First Reserve Corporation, a private-equity firm and Pietro Fiorentini S.p.A., which provides natural gas regulating and metering components.
NGS belongs to Baker Hughes’ Turbomachinery & Process Solutions (“TPS”) segment that primarily supplies natural gas regulating and related products like pipeline repair products, gas meters, chemical injection pumps, electric actuators and others.
Divestment Rationale
The divestment is in line with the company’s strategy of streamlining its portfolio and creating maximum value for investors. Notably, operating income from the TPS segment, which includes the NGS business, is on the decline since the last few quarters. In fact, in first-quarter 2018, operating income from the segment was $119 million, down 24% sequentially and 53% year over year. Also, the Zacks Consensus Estimate for second quarter operating income from this segment stands at $126 million, down 6.3% year over year.
The decision to divest NGS came following last month’s announcement of separating Baker Hughes from its parent company General Electric Company (GE - Free Report) , which is planning to lower exposure in the volatile energy sector and increase focus on aviation, power and renewable energy businesses. Over the next two to three years, General Electric will likely sell its 62.5% stake in Baker Hughes to strengthen its balance sheet and simplify operations.
Deal Details
NGS product line along with its 450 employees (approximately), will be transferred to First Reserve, once the deal closes. Another deal with Pietro Fiorentini enables Baker Hughes to divest the Talamona branch of NGS, which incorporates a manufacturing site in Talamona, Italy that has around 40 workers. The deals, awaiting necessary regulatory approvals, are expected to close in the second half of this year. The individual financial details of the agreements are yet to be disclosed.
Price Performance
Houston, TX-based oilfield service provider, Baker Hughes has lost 10.9% in the past year compared with 8.8% fall of its industry.
Zacks Rank and Stocks to Consider
Baker Hughes currently carries a Zacks Rank #4 (Sell). Investors interested in the Energy sector can opt for some better-ranked stocks like BP p.l.c. (BP - Free Report) and EOG Resources, Inc. (EOG - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
London-based BP is an integrated energy company. The company’s top line for 2018 is anticipated to improve 12.6% year over year, while its bottom line is expected to increase 77.7%.
Houston, TX-based EOG Resources is an upstream energy company. The company’s top line for 2018 is anticipated to improve 41.2% year over year. In the last four reported quarters, the company recorded an average positive earnings surprise of 30.1%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>