Here's Why You Should Hold on to Baker Hughes (BKR) Stock Now
Baker Hughes Company BKR has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days.
The company, currently carrying a Zacks Rank #3 (Hold), has gained 14.2% in the past six months compared with 6.9% growth of the composite stocks belonging to the industry.
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What’s Favoring the Stock?
The West Texas Intermediate crude price is trading at the $84-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 rather 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 $15.1-$15.7 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 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 $2,805 million can easily clear the short-term debt of $797 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 sector are Evolution Petroleum Corporation EPM, Core Laboratories N.V. CLB and Sunoco LP SUN, currently carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Evolution Petroleum is an independent energy company. EPM has a Zacks Style Score of A for Growth and Value.
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 per share is pegged at $1.11 and $1.08, respectively.
Core Labs’ strong presence in the emerging shale plays and its global footprint will provide for steady growth rates going forward. CLB’s technology-heavy portfolio of proprietary products and services gives it the opportunity to optimize production from new and existing fields.
Core Labs has witnessed upward earnings estimate revision for 2023 and 2024 in the past 30 days. The consensus estimate for CLB’s 2023 and 2024 earnings per share is pegged at 88 cents and $1.17, respectively.
Sunoco is among the biggest motor fuel distributors in the United States wholesale market, in terms of volumes. For 2023, the partnership expects an adjusted EBITDA of $865-$915 million.
Over the past 30 days, Sunoco has witnessed upward earnings estimate revisions for 2023 and 2024, respectively. The Zacks Consensus Estimate for SUN’s 2023 and 2024 earnings per share is pegged at $4.37 and $3.81, respectively.
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Core Laboratories Inc. (CLB) : Free Stock Analysis Report
Sunoco LP (SUN) : Free Stock Analysis Report
Baker Hughes Company (BKR) : Free Stock Analysis Report
Evolution Petroleum Corporation, Inc. (EPM) : Free Stock Analysis Report
