Here's Why Hold Strategy is Apt for Baker Hughes Stock
Baker Hughes Company BKR has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days. The Zacks Consensus Estimate for its 2024 earnings per share suggests a year-over-year surge of almost 41%.
What's Favoring the BKR Stock?
The West Texas Intermediate crude price is hovering around the $70-per-barrel mark, which is highly favorable for exploration and production activities. Solid oil prices will likely pave the way for further rig additions despite a slowdown in drilling activities, as upstream players mainly focus on stockholder returns rather than boosting output. This means higher exploration and production activities, leading to improved demand for oilfield service players like Baker Hughes, currently carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Baker Hughes is considerably well-placed in the energy space. Its strong focus is on gas technology and LNG, both of which are essential for addressing the rising global demand for natural gas.
Importantly, the energy major has a strong balance sheet. Over the past two years, Baker Hughes's debt-to-capitalization ratio has consistently been lower than the industry's composite stocks.
Risks to BKR’s Business
A slowdown in orders from Baker Hughes' Oilfield Services & Equipment division has likely negatively impacted the company's revenue. The oilfield service player is strongly exposed to extreme volatility in oil and natural gas prices. Volatility in commodity prices is also affecting exploration and production companies like ConocoPhillips COP, Diamondback Energy, Inc. FANG and Matador Resources Company MTDR.
ConocoPhillips has secured a solid production outlook thanks to its decades of drilling inventories across its low-cost and diversified upstream asset base. The resource base represents the company’s strong footprint in prolific acres in the United States, comprising Eagle Ford shale, the Permian Basin and Bakken shale.
Diamondback Energy, a leading pure-play Permian operator, has reported ongoing enhancements in the average productivity per well in the Midland Basin. Thus, the exploration and production company will likely continue witnessing increased production volumes.
In the United States, EOG Resources is one of the foremost explorers and producers of oil and gas, with its crude reserves spanning across the United States and Trinidad. The company possesses an extensive inventory of high-quality drilling wells in low-cost, premium resources, ensuring a strong business outlook.
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Baker Hughes Company (BKR) : Free Stock Analysis Report
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