Overview

Baker Hughes (BKR) is a leading global provider of energy technology, oilfield services, and industrial solutions, with exposure across drilling, completion, production, LNG, and industrial end markets. With a market capitalization of about $49.3 billion and a price-to-sales ratio of 1.78 (trailing 12 months), BKR is positioned as a large‑cap core holding within the energy services and technology space.

Valuation appears reasonable versus the broader market and peers: BKR trades at a trailing P/E of roughly 17.2x and a forward P/E of about 19.0x, with a price-to-book of 2.71x. Street sentiment is constructive, with a consensus rating skewed toward "buy" (recommendation mean ~1.87 and recommendation key "buy") and a mean target price of approximately $53.14 (range: $40–$61), implying moderate upside potential depending on the current share price.

Over the last 12 months, the stock has increased by about 11.5%, lagging the S&P 500’s ~19.4% gain, suggesting less beta to the broad market but solid performance in the context of energy cyclicality.

Profitability & Cash Flow

Baker Hughes shows improving profitability metrics consistent with disciplined cost management and better mix:

• Operating margin is about 13.5%, supported by an EBITDA margin of 17.95%.
• Net profit margin stands at roughly 10.4%, indicating solid flow‑through from revenue to bottom line.
• Return on equity (ROE) is approximately 16.9%, which is attractive for a capital‑intensive services and equipment provider.

Balance sheet quality is generally sound:

• Debt-to-equity of roughly 33.0 suggests a moderate leverage profile that provides flexibility without being overly aggressive.
• A current ratio of 1.41 indicates adequate short‑term liquidity to meet operating and debt obligations.

On cash generation, Baker Hughes produced roughly $0.79 billion in free cash flow (latest trailing figure). While not exceptionally high relative to market cap, it provides capacity for dividends, share repurchases, and reinvestment in growth and low‑carbon initiatives. The presence of consistent free cash flow, coupled with a mid‑teens ROE, supports the case for ongoing shareholder returns if management maintains capital discipline.

Institutional sponsorship is very strong: institutional holders account for slightly more than 100% of the float (held_percent_institution ~1.02), indicating share lending and short activity but also substantial professional investor engagement and oversight.

Growth Profile

Reported growth is currently modest and somewhat mixed:

• Trailing revenue growth is about 1.5% year over year, reflecting a more mature cycle and pockets of macro uncertainty.
• Reported earnings growth is negative at about -20.8%, suggesting that recent EPS growth has been pressured by factors such as mix, pricing, or one‑offs, even as margins are relatively healthy.

However, the earnings history suggests a clear improvement trend in more recent quarters:

• In earlier years (2017–2021), BKR showed a choppy pattern of earnings, with several misses and occasionally negative EPS (e.g., EPS of -0.05 in 2020 with no estimate, -0.07 vs. 0.16 estimate in early 2021 with a -144% surprise).
• More recently, the company has produced a string of mostly positive surprises:
  • 1Q 2023: EPS 0.28 vs. 0.26 estimate (+7.5% surprise).
  • 2Q 2023: EPS 0.39 vs. 0.33 estimate (+16.9% surprise).
  • 3Q 2023: EPS 0.42 vs. 0.40 estimate (+5.8% surprise).
  • 4Q 2023: EPS 0.51 vs. 0.48 estimate (+6.9% surprise).
  • 1Q 2024: EPS 0.43 vs. 0.40 estimate (+8.6% surprise).
  • 2Q 2024: EPS 0.57 vs. 0.49 estimate (+16.4% surprise).
  • 3Q 2024: EPS 0.67 vs. 0.61 estimate (+10.4% surprise).

There are some projected periods where estimates and actuals turn more mixed (e.g., a -15.4% negative surprise in one quarter), but overall the trajectory from low‑single‑digit earnings to more robust EPS levels above $0.50 per quarter is encouraging and supports a thesis of structural margin improvement.

The combination of modest top‑line growth, margin expansion, and disciplined capital use suggests that BKR’s long‑term EPS growth could outpace its current revenue growth, particularly if LNG and international upstream spending remain constructive.

Competitive Landscape

Baker Hughes operates in a highly competitive, technology‑driven industry with a concentrated set of global peers:

• SLB (Schlumberger) – The largest global oilfield services and technology company, with a broad portfolio spanning subsurface, production, and digital. SLB typically commands a premium valuation and higher margins, reflecting technology depth and scale. Relative to SLB, BKR’s differentiated strength lies in its LNG and turbomachinery equipment franchises and an early push into low‑carbon technologies (CCUS, hydrogen solutions).
• Halliburton (HAL) – More heavily leveraged to North American pressure pumping and completions. HAL often exhibits higher sensitivity to U.S. shale cycles. BKR’s more diversified revenue base (international, LNG, industrial) can provide lower earnings volatility but at times slower cyclical upside versus HAL during strong North American upcycles.
• TechnipFMC (FTI) – Focused on subsea and integrated EPCI solutions. FTI is typically tied to offshore project sanctions and subsea spending. Baker Hughes competes with FTI in subsea and project‑related work but differentiates via broader turbomachinery, digital, and industrial offerings.
• Weatherford International (WFRD) – A restructured competitor with exposure to drilling, well construction, and production services. WFRD’s turnaround and balance sheet repair have improved its competitiveness, but BKR generally benefits from stronger scale, balance sheet, and institutional support.
• NOV Inc. (NOV) – Primarily an equipment and technology provider to drilling and production operations. NOV’s fortunes are closely linked to rig activity and capital equipment orders. BKR overlaps in certain equipment categories but is more diversified into services, digital solutions, and process technologies.

Baker Hughes’ competitive advantages include:

• A diversified portfolio across equipment, services, and digital solutions that reduces dependence on any one sub‑segment of oilfield activity.
• Established positions in LNG and turbomachinery, which are strategically aligned with long‑term gas and decarbonization themes.
• Strong institutional ownership and a solid balance sheet, allowing the company to invest in R&D and low‑carbon technologies without over‑leveraging.

However, the company still competes heavily on technology, pricing, and execution, and peers like SLB and HAL remain formidable in core oilfield services. Maintaining differentiation in digital, industrial, and low‑carbon solutions will be key to defending margins and sustaining above‑cycle returns.