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Last week, you might have seen that Baker Hughes Company (NYSE:BKR) released its yearly result to the market. The early response was not positive, with shares down 3.1% to US$22.17 in the past week. The results look positive overall; while revenues of US$21b were in line with analyst predictions, statutory losses were 7.9% smaller than expected, with Baker Hughes losing US$14.73 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, Baker Hughes' 24 analysts currently expect revenues in 2021 to be US$20.5b, approximately in line with the last 12 months. Baker Hughes is also expected to turn profitable, with statutory earnings of US$0.62 per share. In the lead-up to this report, the analysts had been modelling revenues of US$20.4b and earnings per share (EPS) of US$0.54 in 2021. Although the revenue estimates have not really changed, we can see there's been a nice gain to earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 6.1% to US$26.24. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Baker Hughes analyst has a price target of US$39.00 per share, while the most pessimistic values it at US$17.50. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.0%, a significant reduction from annual growth of 11% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.1% annually for the foreseeable future. It's pretty clear that Baker Hughes' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Baker Hughes following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Baker Hughes' revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Baker Hughes going out to 2025, and you can see them free on our platform here.
Before you take the next step you should know about the 2 warning signs for Baker Hughes that we have uncovered.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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