Saturday, May 17, 2014

There Is No Stopping Baker Hughes

This article was originally published by Seeking Alpha on May 9, 2014 

By Sarfaraz A. Khan. Research Asst. Gohar Yousuf


Baker Hughes could deliver serious revenue and income growth in the coming years.

The company is targeting efficiency through partnerships.

Oil majors, on the other hand, are keeping a lid on their budgets.

Argus Research has recently increased the price target on Baker Hughes (BHI) to $80 from $68 on the back of the expected uptake in the North American market. Meanwhile, Baker Hughes might continue showing strong double-digit growth in the emerging markets, particularly in the Middle East. The business is also eyeing efficiency by partnering with other players in the industry.

By 2016, analysts believe that Baker Hughes could increase its revenues and earnings to $28.23 billion and $6.23 per share, as per data compiled by Thomson Reuters. This would show a 26.3% increase in revenues and 152% increase in earnings from 2013.

The growth, however, is not going to be easy as the leading oil majors are cutting their budgets.

Robust Growth In Emerging Markets

The state-owned energy companies located in the emerging markets, such as PEMEX and Saudi Aramco, will continue to spend billions to develop their resources. According to a report by Barclays, the Middle East market in particular could witness a 14% increase in exploration and production expenditure, which is in stark contrast to what is happening in North America (discussed later in the article).

The international markets focused Schlumberger (SLB), which gets most of its revenues from outside of North America and nearly 70% from the state-owned oil giants, could be … read full article at Seeking Alpha