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Goldman Sachs Upgrades Baker Hughes (BHI) to Buy

March 17, 2014 7:00 AM EDT
Get Alerts BHI Hot Sheet
Price: $57.68 --0%

Rating Summary:
    15 Buy, 20 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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Goldman Sachs upgraded Baker Hughes (NYSE: BHI) from Neutral to Buy with a price target of $72.00 (from $60.00).

Analyst Waqar Syed said, "We upgrade BHI to Buy as we believe it should benefit from our expectation of increases in E&P capital spending and a recovery of pricing power in the pressure pumping market. BHI has sizeable exposure to US land, second only to HAL amongst the large caps. However, its operating margins have lagged HAL’s operating margins. For example, BHI’s NAM margins in 4Q13 were in the high-single digits while those of HAL were in the high-teens. BHI is targeting raising its NAM margins to mid-teens by 2H/2014. We have been skeptical about BHI’s ability to reach those targets, but now that rig activity is stronger than expected and pressure pumping prices could go higher, we believe that BHI may have the tailwind to reach those targets."

It was added, "We believe that consensus estimates do not reflect that possibility and we see that as an opportunity. And finally, despite a strong run this year (+11.8% vs. OSX -2.6%), BHI’s valuation looks compelling. It currently trades at 14.5x/4.9x 2014E P/E and EV/EBITDA, below respective mid-cycle multiples of 15.0x/9.5x. Our new target price assumes above-mid-cycle P/E multiples in support of a positive outlook for the pressure pumping market."

For an analyst ratings summary and ratings history on Baker Hughes click here. For more ratings news on Baker Hughes click here.

Shares of Baker Hughes closed at $61.80 yesterday.


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