Baker Hughes’ 3Q Sales Beat; Analyst Sticks To Hold

Baker Hughes topped 3Q revenue expectations amid signs of stabilization in oil markets. The oil field services company reported revenues of $5.05 billion in 3Q which surpassed the Street consensus of $4.78 billion. Adjusted EPS of $0.04 came in-line with analysts’ forecasts. The company’s top and bottom line still recorded a significant year-over-year decline of 14% and 81%, respectively.

Baker Hughes’ (BKR) 3Q operations have been negatively impacted by weakness in demand caused by COVID-19 pandemic and a decline in oil and gas prices due to surplus production and supply. The stock was down about 1.7% in Wednesday’s extended market trading as the company warned that demand for oil products is slow.

“Despite continued uncertainty in global oil and gas markets and the ongoing impact of the COVID-19 pandemic, we produced solid results in the third quarter of 2020,” Baker Hughes CEO Lorenzo Simonelli said. He further noted, “After significant turmoil during the first half of the year, oil markets have somewhat stabilized. However, demand recovery is beginning to level off and significant excess capacity remains, which could create volatility in the future.” (See BKR stock analysis on TipRanks).

Following quarterly results, Northland Securities analyst Douglas Becker reiterated his Hold rating and a price target of $18 (28.2% upside potential). In a flash note to investors, Becker wrote, “BKR beat consensus EBITDA by 18% and our Street-high estimate by 11%. All four reporting segments were better than expected. Consensus 4Q20 EBITDA could be moving more than 10% higher (~$640mn vs $580mn consensus). We estimate reward outweighs risk 2:1 and expect the results to be positive for the stock.”

Currently, the Street is bullish on the stock. The Strong Buy analyst consensus is based on 10 Buys versus 3 Holds. With shares down over 45% year-to-date, the average price target of $20.08 implies upside potential of about 43% to current levels.