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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) has witnessed negative earnings estimate revision for 2019 and 2020, respectively. For 2019, the Zacks Consensus Estimate for earnings has been revised downward to 88 cents per share from 97 cents over the past 60 days. The consensus estimate for 2020 has also been revised downward from $1.39 per share to $1.25 over the same time frame.

The downward estimate revision reflects a challenged outlook for the oilfield service player.

Drillers in North America have a conservative capital spending program since shareholders are building pressure on explorers for more returns in a volatile commodity pricing scenario. As the upstream energy players are curbing spending on new drilling, there has been a significant decline in the count of rigs in both Canada and the United States. The average count of rigs in Canada for 2019 has been recorded at 135 versus 191 in the prior year, per data provided by Baker Hughes. Moreover, in the United States, the average count fell to 957 in 2019 from 1032 in 2018, added Baker Hughes.

Precisely, with reduced spending from North American drillers, Baker Hughes is likely to get fewer contracts related to oilfield services. Moreover, we expect the company’s earnings growth in the coming five years to be 8%, lower than the industry’s 11.4%.

Given this backdrop, the company’s Zacks Rank #5 (Strong Sell) is well justified and hence investors should consider discarding the stock right away.

Stocks to Consider

Some better-ranked players in the energy space are Murphy USA Inc (MUSA - Free Report) , Sasol Limited (SSL - Free Report) and CNX Resources Corporation (CNX - Free Report) . While Murphy USA and Sasol sport a Zacks Rank #1 (Strong Buy), CNX Resources carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Murphy USA beat the Zacks Consensus Estimate in three of the prior four quarters.

For fiscal 2020, Sasol is likely to post earnings growth of 30%.

CNX Resources surpassed the Zacks Consensus Estimate in two of the prior four quarters. It has a positive earnings surprise of 34.8%, on average, for the trailing four quarters.

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