Baker Hughes is the IBD Stock Of The Day for Tuesday. Drilling and energy companies are riding a wave of gains as oil prices hover near year-highs. Those gains put BKR stock close to a buy point as shares trade near their highest level in 2023.
Energy companies are on a tear lately as oil futures trade near their highest levels since August 2022, lifted by concerns over tight supply and forecast increases in demand. Drilling equipment and services leader Diamond Offshore cleared an early entry Friday. Another offshore drilling contractor, U.K.-based Valaris, was the Stock Of The Day Thursday. Meanwhile, natural gas producer EQT broke out past a buy point Monday.
Houston-based Baker Hughes provides drilling services and equipment for oil and natural gas producers, as well as liquid natural gas (LNG) through its industrial and energy technology (IET) segment. Oilfield equipment and services account for about 60% of sales, while there's been a growing emphasis on its IET division. Along with LNG transportation, Baker Hughes' IET services include gas refinement, energy decarbonization and technology solutions.
Baker Hughes' earnings and revenue growth has accelerated the past two quarters, beating analysts' estimates for the period. For its Q2 results on July 19, Baker Hughes reported a 255% increase in adjusted earnings to 39 cents per share. Revenue leapt 25% to $6.32 billion. FactSet guided earnings of 33 cents per share on $6.27 billion in revenue.
Baker Hughes maintains a constructive outlook for global spending for the rest of the year, despite lower oil prices in the first half of 2023. The company expects any softness in North America to be "more than offset" by strength in its international and offshore markets.
UBS lifted its price target on BKR stock to 37 from 34 on Aug. 17 and maintained its neutral rating on shares. Analyst Josh Silverstein noted that West Texas intermediate crude oil futures are expected to hold at $75 to $85 a barrel through 2025. Meanwhile, the industry should see favorable trends in international and offshore activity.
Baker Hughes Stock
BKR stock has been trading tightly the past five weeks and has buy point at its 2023 high of 36.48. Investors could find an early entry opportunity at 35.62, which can also be viewed as a handle to a long consolidation.
Shares are rebounding off their 21-day exponential moving average after reclaiming the technical line on Monday.
Keep in mind that the stock market remains in a correction. The Nasdaq's advance on Friday marked the beginning of a rally attempt, and a follow-through day could confirm a new uptrend as early as this week. But until that occurs, investors should be playing defense with their capital. They should be building watchlists of top stocks near buy points to act on once the market status shifts.
BKR Stock is a member of the IBD Big Cap 20 list of leading large-cap growth stocks. It also leads the Oil & Gas-Machinery/Equipment Group, according to IBD Stock Checkup.
Baker Hughes has a perfect 99 Composite Rating, which combine various technical indicators into one easy-to-read score. BKR stock has a 91 EPS Rating. The stock's relative strength line is off its February highs, but BKR still holds a muscular 92 RS Rating.
BKR stock has rallied off its 2023 low of 26.12 from March to post a 19.3% gain on the year.
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