UBS analyst, Angie Sedita reiterated her Buy rating and $55 PT on Baker Hughes (NYSE: BHI) based 13x 2018E EV/EBITDA.

BHI came out of the gate with a meaningfully changed business model primarily for international markets. The new model is an asset-light structure focused on product lines vs being a "fully integrated service" provider in every geomarket. The company will have a greater focus on "return on capital" by "product line" and on generating cash (not margins). BHI is reverting back to more of a "manufacturing model" (as seen in its early days). Without international scale (as SLB & HAL have) we believe a fully integrated service model in the international markets will almost always be financially challenging. The US market for BHI will only change modestly with a larger retrenchment in the money losing frac markets. In our view, the end outcome of the international strategy, should be higher margins over the intermediate term ('17-‘18). It will be interesting to see how this model plays out once the recovery is fully under way.

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Shares of Baker Hughes closed at $45.54 yesterday.