The IBD Stock Of The Day for Tuesday is Houston-based Baker Hughes. BKR stock has shaped in a 10-week cup base with a $39.88 buy point.
Baker Hughes equipment and technologies facilitate onshore and offshore well development, pipelines, gas storage facilities and refinement processes in more than 120 countries. It is also a leading engineering firm in the construction of import and export facilities for liquefied natural gas (LNG), which is undergoing a boom in the U.S. following the restructuring of natural gas markets following Russia's invasion of Ukraine.
High Energy Oilfield Services Player
The oilfield services and equipment giant reported first-quarter quarterly revenues of $4.84 billion for Q1, missing consensus estimates of $4.99 billion. Its first quarter adjusted earnings per share of 15 cents also fell short of the expected 19 cents per share. Despite the troubles, Baker Hughes' revenue was up 1% year-over-year and its adjusted EPS is up 26% during the same period, due to strong demand.
"Our first-quarter results reflect operating in a very volatile market environment during the first few months of 2022," said Chairman and CEO Lorenzo Simonelli during the conference call with shareholders in April. "As we look ahead to the rest of 2022, we see a favorable oil and gas price backdrop, as well as a dynamic operating environment, with perhaps the most challenging supply chain and inflationary environment we have seen in several decades."
Oil and natural gas prices have spiked well above 10-year highs as Russia's war on Ukraine snarled international supply lines just as energy demand rebounded from pandemic lows. But the challenge of devising an exit strategy from Russian operations constructive to shareholder interests, and of wrestling with record-setting inflation sweeping across oil industry labor, field operations and equipment markets countered the price gain benefits.
BakerHughes anticipates its Russia-related businesses, which made up 4% of its total revenue in Q1, to generate weaker revenues this year as it suspended new investments in the country. However, Baker Hughes predicts it will see mid- to high-single-digit growth across its business lines for the rest of the year, except for oilfield equipment, which will decline double-digits after de-consolidating its subsea drilling systems (SDS) business, according to CFO Brian Worrell. The company has seen a 51% increase in orders year-over-year, across all four business segments.
BKR Stock: RS Line At New Highs
Analysts have given BKR stock a "strong buy" rating with an average price target of $40.31, according to the Nasdaq consensus, and Zacks Investment Research is forecasting EPS of $1.17 for the year. The company's stock is up nearly 57% year-to-date and up 28% from an April 25 low.
The stock on Monday traded about 6% below its base's 39.88 buy point. A five-week advance lifted shares back above their 50-day/10-week moving average and hoisted BKR stock's relative strength line to new highs — often a positive signal ahead of a possible breakout.
The stock could form a possible handle on the base, potentially lower the entry point, but not before the end of this week.
Baker Hughes ranks 5th in IBD's Oil & Gas Machinery group, which is led by MRC Global. BKR stock has a Composite Rating of 92 out of 99. It has a 94 Relative Strength Rating, which shows strong price performance over the past 52 weeks compared to all other stocks in IBD's database.
Shares slipped 0.5% to $37.64 during market hours on Monday.
