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Here's Why it is Worth Investing in Baker Hughes (BKR) Stock

Baker Hughes Company BKR has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days.

The company, currently carrying a Zacks Rank #2 (Buy), has gained 27.3% in the past six months compared with 19.2% growth of the composite stocks belonging to the industry.


Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research


What’s Favoring the Stock?

The West Texas Intermediate crude price is trading at more than the $80-per-barrel mark, which is highly favorable for exploration and production activities.

Strong 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 production.

Higher exploration and production activities will lead to improved demand for oilfield service players like Baker Hughes. In 2023, the company expects revenues of $14.5-$15.5 billion from the Oilfield Services and Equipment unit, indicating an increase from the $13.2 billion reported in 2022.

Baker Hughes predicts significant growth from a series of profitable international liquefied natural gas (LNG) contracts. With the growing demand for clean energy, countries across the world are investing in LNG terminals.

Hence, the company is planning to extend its reach beyond oilfields to capitalize on contracts for manufacturing turbines and associated equipment being used in LNG export terminals. Notably, BKR expects to receive massive orders for LNG equipment this year.

Baker Hughes is strongly committed to returning capital to shareholders. Compared with composite stocks belonging to the industry, BKR has been consistently paying higher dividend yields over the past two years.

Baker Hughes has a strong balance sheet. The company’s cash balance of $2,488 million can easily clear the short-term debt of $677 million, reflecting a strong liquidity profile. The debt-to-capitalization ratio of Baker Hughes has consistently been lower than the composite stocks belonging to the industry over the past two years.

Other Stocks to Consider

Investors interested in the energy sector may look at the following companies that also presently carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Phillips 66 PSX reported fourth-quarter 2022 adjusted earnings of $4 per share, missing the Zacks Consensus Estimate of $4.34. Lower-than-expected quarterly earnings were driven by a decline in contributions from the Chemicals segment. The negatives were partially offset by strong refining margins worldwide.

Phillips 66 received approval from the board of directors to hike its dividend. The new quarterly dividend of $1.05 per share reflects an increase of 8.2% from the previous quarter’s 97 cents and a 14% hike from the year-ago quarter’s 92 cents.

Enterprise Products Partners’ EPD fourth-quarter 2022 adjusted earnings per limited partner unit of 65 cents beat the Zacks Consensus Estimate of 60 cents. Strong quarterly earnings were driven by higher contributions from the NGL and Natural Gas Pipelines & Services businesses.

Enterprise Products Partners is strongly committed to returning cash to shareholders. EPD’s board of directors increased its cash distribution to 49 cents per unit, suggesting a 3.2% hike from the last paid-out distribution of 47.5 cents.

Oceaneering International, Inc.’s OII fourth-quarter 2022 adjusted profit of 6 cents per share missed the Zacks Consensus Estimate of a profit of 17 cents. The underperformance was due to weaker results in certain segments.

For 2023, Oceaneering projects consolidated EBITDA of $260-$310 million and a free cash flow generation of $75-$125 million.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Enterprise Products Partners L.P. (EPD) : Free Stock Analysis Report

Oceaneering International, Inc. (OII) : Free Stock Analysis Report

Phillips 66 (PSX) : Free Stock Analysis Report

Baker Hughes Company (BKR) : Free Stock Analysis Report

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