- Baker Hughes (BHGE +2.2%) is higher even after BofA Merrill Lynch initiates coverage of the stock with an Underperform rating and a $36 price target, as oil and gas companies rise broadly on the heels of today's strong gains in crude oil prices.
- BofA believes BHGE offers investors exposure to an expected global oilfield services and equipment giant with a solid, defensive balance sheet but one with few near-term catalysts to propel the stock, as the firm foresees only sideways movement in oil prices.
- The firm also has a cautious outlook on offshore equipment, which accounts for ~15% of BHGE's pro forma revenues, and notes the company's 71% exposure to international markets.
- On valuation, the firm thinks BHGE should trade at a discount to proven higher-margin Schlumberger (SLB +1.2%) but in-line with Halliburton (HAL +0.9%) given its stronger balance sheet but its weaker North American market position.
- Now read: Buy Halliburton
Original article