Company Reports

Baker Hughes represents one of the “big three” oilfield service firms, in league with industry heavyweights Schlumberger and Halliburton. It maintains sizable share in several end markets, including specialty chemicals and directional drilling, and it’s maintained the lead in specialty chemicals since at least 2008. The majority of Baker Hughes’ revenue comes from international (non-U.S.) markets, which tend to be less volatile, but challenges associated with the inherent cyclicality of oil and gas markets are ever-present. We expect demand for oil and gas will remain high over the next few years, presenting ample growth opportunities in Baker Hughes’ core market.

We see no reason to change our $39 fair value estimate for no-moat-rated Baker Hughes. The company’s first-quarter earnings results were largely in line with our expectations. Revenue of roughly $6.4 billion rose 12% year on year driven by Baker Hughes’ industrial and energy technology, or IET, business. While IET represents a smaller portion of Baker’s sales mix, we consider it the better business.

Baker Hughes represents one of the “big three” oilfield service firms, in league with industry heavyweights Schlumberger and Halliburton. It maintains sizable share in several end markets, including specialty chemicals and directional drilling, and it’s maintained the lead in specialty chemicals since at least 2008. The majority of Baker Hughes’ revenue comes from international (non-U.S.) markets, which tend to be less volatile, but challenges associated with the inherent cyclicality of oil and gas markets are ever-present. We expect demand for oil and gas will remain high over the next few years, presenting ample growth opportunities in Baker Hughes’ core market.

Baker Hughes represents one of the “big three” oilfield service firms, in league with industry heavyweights Schlumberger and Halliburton. It maintains sizable share in several end markets, including specialty chemicals and directional drilling, and it’s maintained the lead in specialty chemicals since at least 2008. The majority of Baker Hughes’ revenue comes from international (non-U.S.) markets, which tend to be less volatile, but challenges associated with the inherent cyclicality of oil and gas markets are ever-present. We expect demand for oil and gas will remain high over the next few years, presenting ample growth opportunities in Baker Hughes’ core market.

Baker Hughes represents one of the “big three” oilfield service firms, in league with industry heavyweights Schlumberger and Halliburton. It maintains sizable share in several end markets, including specialty chemicals and directional drilling, and it’s maintained the lead in specialty chemicals since at least 2008. The majority of Baker Hughes’ revenue comes from international (non-U.S.) markets, which tend to be less volatile, but challenges associated with the inherent cyclicality of oil and gas markets are ever-present. We expect demand for oil and gas will remain high over the next few years, presenting ample growth opportunities in Baker Hughes’ core market.

Baker Hughes concluded 2023 with very strong fourth-quarter performance thanks to persistently elevated LNG contracting activity. The firm’s industrial energies technologies segment drove total sequential top-line growth of 3%, offsetting flat sales from its oilfield services business. Firmwide adjusted EBITDA reached the top end of quarterly guidance at nearly $1.1 billion, exiting the year with a 16% margin. We’ll incorporate the firm’s full financial and operating results shortly, but after this first look we maintain our no-moat rating and $35 fair value estimate. Shares are slightly undervalued at the time of writing.

Baker Hughes delivered another strong performance in the third quarter, with significant contributions from its industrial energy technologies, or IET, segment as LNG contracting activity continues accelerating around the world. The firm slightly raised guidance for fiscal 2023, with the midpoint for revenue and adjusted EBITDA both increasing about 1% compared to last quarter’s outlook. The firm is now on track to deliver more nearly $25.7 billion in sales for 2023, a 21% year-over-year increase, while lifting its adjusted EBITDA margin by about 50 basis points to 14.6%. We’re slightly raising our fair value estimate to $35 following results, and we maintain our no-moat rating.

Baker Hughes represents one of the “big three” oilfield service firms, in league with industry heavyweights Schlumberger and Halliburton. It maintains sizable share in several end markets, including specialty chemicals and directional drilling, and it’s maintained the lead in specialty chemicals since at least 2008. The majority of Baker Hughes’ revenue comes from international (non-U.S.) markets, which tend to be less volatile, but challenges associated with the inherent cyclicality of oil and gas markets are ever-present. We expect demand for oil and gas will remain high over the next few years, presenting ample growth opportunities in Baker Hughes’ core market.

Baker Hughes had a strong second-quarter performance, thanks to continued strength in international and offshore oil and gas markets as well as elevated liquefied natural gas contracting activity worldwide. Total revenue jumped $6.3 billion with an adjusted EBITDA margin of 14.4%, up 25% and 144 basis points year over year, respectively. We maintain our outlook regarding Baker Hughes’ growth prospects over the next five years and forecast average annual revenue growth of 9% with an average adjusted EBITDA margin of 17%. Our $34 per share fair value estimate and no-moat rating are unchanged following results.

Baker Hughes represents one of the “big three” oilfield service firms, in league with industry heavyweights Schlumberger and Halliburton. It maintains sizable share in several end markets, including specialty chemicals and directional drilling, and it’s maintained the lead in specialty chemicals since at least 2008. The majority of Baker Hughes’ revenue comes from international (non-U.S.) markets, which tend to be less volatile, but challenges associated with the inherent cyclicality of oil and gas markets are ever-present. We expect demand for oil and gas will remain high over the next few years, presenting ample growth opportunities in Baker Hughes’ core market.

No-moat Baker Hughes posted a solid start to 2023 as strong offshore activity offset the seasonal weakness typically reflected in first-quarter results and as the firm converts its everincreasing gas technologies backlog. Total revenue was $5.7 billion, up 18% year over year and down 3% sequentially. Firmwide adjusted EBITDA margin also declined slightly—about 240 basis points quarter over quarter—due to seasonally depressed oilfield service demand, a higher mix of lower-margin equipment revenue, and continued supply chain challenges. Despite modest near-term headwinds in the quarter, our longer-term outlook is unchanged, and we maintain our $34 fair value estimate following the results.

Baker Hughes represents one of the “big three” oilfield service firms, in league with industry heavyweights Schlumberger and Halliburton. It maintains sizable share in several end markets, including specialty chemicals and directional drilling, and it’s maintained the lead in specialty chemicals since at least 2008. The majority of Baker Hughes’ revenue comes from international (non-U.S.) markets, which tend to be less volatile, but challenges associated with the inherent cyclicality of oil and gas markets are ever-present. We expect demand for oil and gas will remain high over the next few years, presenting ample growth opportunities in Baker Hughes’ core market.

No-moat Baker Hughes concluded 2022 on a high note, posting $5.9 billion of revenue in the fourth quarter, a level not seen since 2019. The firm also demonstrated exceptional profitability with an adjusted EBITDA margin of 16% for the fourth quarter, about 300 basis points higher than the quarterly average, going back to 2018. We’ll incorporate the firm’s full financial and operational results shortly, but after this first look our $34 fair value estimate is unchanged.

Baker Hughes posted solid third-quarter results, with revenue increasing 5% year over year and 6% sequentially. The firmwide operating margin was 11% as strong performance from the oilfield services and turbomachinery & process solutions segments offset weak performance from the oilfield equipment segment. Despite the solid results, we’re slightly lowering our fair value estimate to $34 per share from $35 as near-term headwinds from global economic challenges weigh on customer activity over the next few quarters. We’re still optimistic about the firm’s long-term prospects due to strong demand for oil and gas production and additional natural gas refinery capacity that will keep demand elevated through 2026. Our no-moat, stable moat trend, and High Morningstar Uncertainty ratings are unchanged following results.

Baker Hughes represents one of the “big three” oilfield service firms, in league with industry heavyweights Schlumberger and Halliburton. It maintains sizable share in several end markets, including specialty chemicals and directional drilling, and it’s maintained the lead in specialty chemicals since at least 2008. The majority of Baker Hughes’ revenue comes from international (non-U.S.) markets, which tend to be less volatile, but challenges associated with the inherent cyclicality of oil and gas markets are ever-present. We expect demand for oil and gas will remain high over the next few years, presenting ample growth opportunities in Baker Hughes’ core market.

After taking a fresh look at Baker Hughes, we’re maintaining our no-moat rating, stable trend, and High Uncertainty Rating, and after incorporating its second-quarter results, we’re raising our fair value estimate to $35 from $31.

Baker Hughes represents one of the “big three” oilfield service firms, in league with industry heavyweights Schlumberger and Halliburton. It maintains sizable share in several end markets, including specialty chemicals and directional drilling, and it’s maintained the lead in specialty chemicals since at least 2008. The majority of Baker Hughes’ revenue comes from international (non-U.S.) markets, which tend to be less volatile, but challenges associated with the inherent cyclicality of oil and gas markets are ever-present. We expect demand for oil and gas will remain high over the next few years, presenting ample growth opportunities in Baker Hughes’ core market.

After several quarters of impressive gains, Baker Hughes' results took a step back in the first quarter 2022. Revenue dropped 12% sequentially, driven mainly by the Turbomachinery segment, which experienced a seasonal drop in revenue even larger than last year's first quarter. As a result, Turbomachinery segment revenue was down 9% year over year, though this was offset by a 13% increase in the Oilfield Service segment, leaving companywide revenue flat year over year. Adjusted operating margins of 7.2% were also down sequentially, though up about 160 basis points from the prior year quarter. Our fair value and no-moat rating are unchanged following the results.

We're adjusting our fair value estimates for large diversified oilfield service companies. This accounts for positive recent financial results and improvement in the near-term outlook for industry spending in the light of high oil prices. One negative factor is the potential disruption to Russia operations, which affects Schlumberger the most. Our fair value for Baker Hughes increases to $31 per share from $29 per share previously, and Halliburton increases to $33 from $30 previously. Schlumberger stays at $49 per share. Our moat ratings for each remain unchanged.

Baker Hughes pronounced itself as the oilfield-services company of the future upon completion of its merger with GE Oil & Gas in July 2017, with promises of a transformative leap in customers’ performance along with unrivaled value creation for its shareholders. Yet hardly had the merger integration been completed when GE announced a pivot in strategy, including a speedy separation from the newly merged Baker Hughes. By late 2019, GE no longer was the majority owner of Baker Hughes.